EXHIBIT 2.2
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
AGILE SOFTWARE CORPORATION,
ALASKA ACQUISITION CORPORATION,
AND
DIGITAL MARKET, INC.
October 10, 1999
TABLE OF CONTENTS
Page
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1. The Merger..................................................................................................... 1
1.1 The Merger................................................................................................ 1
1.2 Closing; Effective Time................................................................................... 2
1.3 Effect of the Merger...................................................................................... 2
1.4 Certificate of Incorporation; Bylaws...................................................................... 2
1.5 Directors and Officers.................................................................................... 2
1.6 Effect on Capital Stock................................................................................... 2
1.7 Surrender of Certificates................................................................................. 6
1.8 No Further Ownership Rights in Digital Capital Stock...................................................... 9
1.9 Lost, Stolen or Destroyed Certificates.................................................................... 9
1.10 Tax and Accounting Consequences........................................................................... 9
1.11 Certificate Legends....................................................................................... 9
1.12 Taking of Necessary Action; Further Action................................................................ 9
2. Representations and Warranties of Digital...................................................................... 9
2.1 Organization, Standing and Power......................................................................... 10
2.2 Authority................................................................................................ 10
2.3 Governmental Authorization............................................................................... 11
2.4 Financial Statements..................................................................................... 11
2.5 Capital Structure........................................................................................ 11
2.6 Absence of Certain Changes............................................................................... 12
2.7 Absence of Undisclosed Liabilities....................................................................... 12
2.8 Litigation............................................................................................... 13
2.9 Restrictions on Business Activities...................................................................... 13
2.10 Intellectual Property.................................................................................... 13
2.11 Interested Party Transactions............................................................................ 17
2.12 Minute Books............................................................................................. 17
2.13 Complete Copies of Materials............................................................................. 17
2.14 Material Contracts....................................................................................... 17
2.15 Inventory................................................................................................ 18
2.16 Accounts Receivable...................................................................................... 18
2.17 Customers and Suppliers.................................................................................. 18
2.18 Employees and Consultants................................................................................ 19
2.19 Title to Property........................................................................................ 19
2.20 Environmental Matters.................................................................................... 19
2.21 Taxes.................................................................................................... 20
2.22 Employee Benefit Plans................................................................................... 22
2.23 Employee Matters......................................................................................... 24
2.24 Insurance................................................................................................ 25
2.25 Compliance With Laws..................................................................................... 25
2.26 Brokers' and Finders' Fees............................................................................... 25
2.27 Bank Accounts............................................................................................ 25
2.28 Indemnification Claims................................................................................... 25
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TABLE OF CONTENTS
(continued)
2.29 Power of Attorney........................................................................................ 25
2.30 Permit Application; Information Statement................................................................ 25
2.31 Representations Complete................................................................................. 26
3. Representations and Warranties of Agile and Merger Sub......................................................... 26
3.1 Organization, Standing and Power......................................................................... 26
3.2 Authority................................................................................................ 26
3.3 SEC Documents; Financial Statements...................................................................... 27
3.4 Capital Structure........................................................................................ 28
3.5 Interim Operations of Merger Sub......................................................................... 28
3.6 Permit Application; Information Statement................................................................ 28
3.7 Capital Resources........................................................................................ 29
3.8 Representations Complete................................................................................. 29
4. Conduct Prior To The Effective Time............................................................................ 29
4.1 Conduct of Business of Digital........................................................................... 29
4.2 No Solicitation.......................................................................................... 31
5. Additional Agreements.......................................................................................... 32
5.1 Preparation of Permit Application/Information Statement.................................................. 32
5.2 Approval of Shareholders................................................................................. 33
5.3 Access to Information.................................................................................... 33
5.4 Confidentiality.......................................................................................... 34
5.5 Public Disclosure........................................................................................ 34
5.6 Consents; Cooperation.................................................................................... 34
5.7 Shareholder Voting Agreement............................................................................. 34
5.8 Exemption from Federal Registration; California Blue Sky................................................. 34
5.9 Securityholder Agreement; Lock-Up........................................................................ 35
5.10 Legal Requirements....................................................................................... 35
5.11 Employee Options......................................................................................... 35
5.12 Escrow Agreement......................................................................................... 36
5.13 Option Exercise.......................................................................................... 36
5.14 Assumed Options; SEC Filing.............................................................................. 36
5.15 Reorganization........................................................................................... 36
5.16 Digital Warrants Exercise................................................................................ 36
5.17 Directors' and Officers' Indemnification................................................................. 36
5.18 Employees................................................................................................ 36
5.19 Employee Registration Rights............................................................................. 37
5.20 Preferred Registration Rights and Obligations Agreement; Letter of Transmittal and Custodian Agreement... 37
5.21 Expenses; Transaction Fees............................................................................... 37
5.22 Termination of 401(k) Plan............................................................................... 37
5.23 Employee Benefits........................................................................................ 37
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TABLE OF CONTENTS
(continued)
6. Conditions to the Merger....................................................................................... 38
6.1 Conditions to Obligations of Each Party to Effect the Merger............................................. 38
6.2 Additional Conditions to the Obligations of Agile and Merger Sub......................................... 38
6.3 Additional Conditions to Obligations of Digital.......................................................... 40
7. Termination, Amendment and Waiver.............................................................................. 41
7.1 Termination.............................................................................................. 41
7.2 Effect of Termination.................................................................................... 42
7.3 Amendment................................................................................................ 42
7.4 Extension; Waiver........................................................................................ 42
8. Escrow and Indemnification..................................................................................... 42
8.1 Escrow Fund.............................................................................................. 42
8.2 Indemnification.......................................................................................... 43
8.3 Escrow Period; Release From Escrow....................................................................... 44
8.4 Claims Upon Escrow Fund.................................................................................. 45
8.5 Objections to Claims..................................................................................... 45
8.6 Resolution of Conflicts and Arbitration.................................................................. 46
8.7 Shareholders' Agent...................................................................................... 47
8.8 Actions of the Shareholders' Agent....................................................................... 48
8.9 Third-Party Claims; Settlements.......................................................................... 48
9. General Provisions............................................................................................. 49
9.1 Notices.................................................................................................. 49
9.2 Definitions.............................................................................................. 50
9.3 Counterparts............................................................................................. 50
9.4 Entire Agreement; Nonassignability; Parties in Interest.................................................. 50
9.5 Severability............................................................................................. 50
9.6 Remedies Cumulative...................................................................................... 50
9.7 Arbitration.............................................................................................. 50
9.8 Governing Law............................................................................................ 51
9.9 Rules of Construction.................................................................................... 51
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of October 10, 1999 by and among Agile Software Corporation, a
Delaware corporation ("Agile"), Alaska Acquisition Corporation, a Delaware
corporation ("Merger Sub") and wholly owned subsidiary of Agile, and Digital
Market, Inc., a California corporation ("Digital").
RECITALS
A. The Boards of Directors of Digital, Agile and Merger Sub believe it is
in the best interests of their respective companies and the shareholders of
their respective companies that Digital and Merger Sub combine into a single
company through the statutory merger of Digital with and into Merger Sub (the
"Merger") and, in furtherance thereof, have approved the Merger.
B. Pursuant to this Agreement, prior to the Effective Time (as defined in
Section 1.2), all outstanding shares of preferred stock of Digital ("Digital
Preferred Stock") will be converted into outstanding shares of common stock of
Digital ("Digital Common Stock").
C. Pursuant to the Merger, among other things, the outstanding shares of
Digital Common Stock shall be converted into the right to receive the Merger
Consideration (as defined in Section 1.6(a)) upon the terms and subject to the
conditions set forth herein.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code.
E. Concurrent with the execution and delivery of this Agreement, as a
material inducement to Agile and Merger Sub to enter into this Agreement, all of
the shareholders who are officers and directors of Digital and all of the
shareholders of Digital affiliated with the directors and officers of Digital
are entering into a Shareholder Voting Agreement (each a "Voting Agreement"),
with Agile.
NOW, THEREFORE, in consideration of the covenants and representations set
forth herein, and for other good and valuable consideration, the parties agree
as follows:
1. The Merger.
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1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
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subject to and upon the terms and conditions of this Agreement, the Certificate
of Merger in the form attached hereto as Exhibit A (the "Certificate of Merger")
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and the applicable provisions of the Delaware General Corporation Law ("Delaware
Law") and the California Corporations Code ("California Law"), Digital shall be
merged with and into Merger Sub, the separate corporate existence of Digital
shall cease and Merger Sub shall continue as the surviving corporation. Merger
Sub as the surviving corporation after the Merger is hereinafter sometimes
referred to as the "Surviving Corporation."
1.2 Closing; Effective Time. The closing of the transactions contemplated
-----------------------
hereby (the "Closing") shall take place as soon as practicable, but no later
than two (2) business days, after the satisfaction or waiver of each of the
conditions set forth in Section 6 hereof, or at such other time as the parties
hereto agree (the "Closing Date"). The Closing shall take place at the offices
of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, or at such other location as the parties hereto agree. In connection
with the Closing, the parties hereto shall cause the Merger to be consummated by
filing (i) the Certificate of Merger and a California Franchise Tax Board Tax
Clearance Certificate with the Secretary of State of the State of California, in
accordance with the relevant provisions of California Law and (ii) the
Certificate of Merger with the Secretary of State of the State of Delaware (the
time of the filing with the Delaware Secretary of State being the "Effective
Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
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shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of California Law and Delaware Law. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of Digital and Merger Sub
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of Digital and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
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(a) At the Effective Time, the Certificate of Incorporation of the
Merger Sub, as in effect immediately prior to the Effective Time and as set
forth in Exhibit B to this Agreement, shall be the Certificate of Incorporation
---------
of the Surviving Corporation until thereafter amended as provided by law and
such Certificate of Incorporation; provided, however, that Section 1 of the
Certificate of Incorporation of the Surviving Corporation shall be amended to
read as follows: "First: The name of the corporation is Digital Market, Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by law and such Bylaws of the Surviving
Corporation.
1.5 Directors and Officers. At the Effective Time, the directors and
----------------------
officers of Merger Sub immediately prior to the Effective Time shall be the
directors and officers of the Surviving Corporation, until their respective
successors are duly elected or appointed and qualified.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
-----------------------
Merger and without any action on the part of Merger Sub, Digital or the holders
of any of the following securities:
(a) Conversion of Digital Capital Stock. Each share of Digital
-----------------------------------
Common Stock (assuming the conversion of all outstanding shares of the Digital
Preferred Stock) issued and outstanding immediately prior to the Effective Time
(other than shares to be canceled pursuant to Section 1.6(b) hereof and any
Dissenting Shares (to the extent provided in Sections 1.6(g) and 1.7(i) hereof))
will be canceled and extinguished and shall be converted and
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exchanged, without any action on the part of the holders (the "Shareholders")
thereof, into the right to receive the following (the "Merger Consideration"):
(i) that number of validly issued, fully paid and
nonassessable shares of the Common Stock of the Agile ("Agile Common Stock")
equal to the amount obtained by (i) the quotient of $52,000,000 divided by the
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Deemed Closing Market Price (defined below) divided by (ii) the number of Total
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Outstanding Shares (the "Exchange Ratio"); and
(ii) the cash amount equal to $20,000,000 divided by the
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Total Outstanding Shares (the "Per Share Cash Consideration").
For purposes of this Agreement, the term "Total Outstanding Shares" shall
mean the sum of the number of shares of Digital Common Stock issued and
outstanding immediately prior to the Effective Time, on a fully-diluted, as-
converted basis, assuming that all outstanding shares of Digital Preferred
Stock, all warrants ("Warrants") to purchase shares of Digital's capital stock
("Digital Capital Stock"), all options to purchase shares of Digital Common
Stock to the extent vested, and other rights to acquire Digital Capital Stock
outstanding immediately prior to the Effective Time are exercised (and converted
to shares of Digital Common Stock if exercisable for shares of Digital Preferred
Stock), as the case may be, immediately prior to the Effective Time, provided,
however, that the Total Outstanding Shares shall be exclusive of shares of
---------
Digital Common Stock subject to options to the extent unvested immediately prior
to the Effective Time; and provided further that, for purposes of determining
the "Total Outstanding Shares," it shall be assumed that the Warrants were
exercised for shares of Digital Capital Stock on a "net exercise" basis.
Additionally, for purposes of this Agreement, the term "Deemed Closing
Market Price" shall mean the average of the closing price per share of Agile
Common Stock as quoted on the NASDAQ National Market System for the 10
consecutive trading days ending two (2) trading days immediately prior to the
Closing Date (such average to include the closing price per share of Agile
Common Stock of the first day of such two trading days), as reported in the West
Coast edition of the Wall Street Journal, provided that, if (A) such average is
equal to, or greater than, $85.00 per share of Agile Common Stock, the Deemed
Closing Market Price shall be deemed to be $85.00 per share or (B) such average
is equal to, or less than, $35.00 per share of Agile Common Stock, the Deemed
Closing Market Price shall be deemed to be $35.00 per share.
(b) Cancellation of Digital Common Stock Owned by Agile. At the
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Effective Time, each share of Digital Common Stock owned by Agile or any direct
or indirect wholly owned subsidiary of Agile immediately prior to the Effective
Time shall be canceled and extinguished without any conversion thereof.
(c) Common Stock of Merger Sub. At the Effective Time, each share
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of Common Stock of Merger Sub ("Merger Sub Common Stock") issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one validly issued, fully paid and nonassessable share of Common Stock of
the Surviving Corporation. Each stock certificate of Merger Sub evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
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(d) Adjustments to Exchange Ratio. The Exchange Ratio and Per Share
-----------------------------
Cash Consideration shall be adjusted to reflect fully the effect of any stock
split, reverse split, stock dividend (including any dividend or distribution of
securities convertible into Agile Common Stock or Digital Common Stock),
reorganization, recapitalization or other like change with respect to Agile
Common Stock or Digital Common Stock occurring after the date hereof and prior
to the Effective Time.
(e) Fractional Shares. No fraction of a share of Agile Common Stock
-----------------
will be issued, but in lieu thereof each holder of shares of Digital Common
Stock who would otherwise be entitled to a fraction of a share of Agile Common
Stock (after aggregating all fractional shares of Agile Common Stock to be
received by such holder) shall receive from Agile an amount of cash (rounded to
the nearest whole cent) equal to the product of (i) such fraction, multiplied by
(ii) the Actual Closing Market Price (as defined in Section 1.7(b)(ii) hereof).
The fractional share interests of each Digital shareholder shall be aggregated,
so that no Digital shareholder shall receive cash in respect of fractional share
interests in an amount greater than the value of one full share of Agile Common
Stock.
(f) Preferred Stock, Options and Warrants.
-------------------------------------
(i) Preferred Stock. Digital shall take all necessary action to
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cause all shares of Digital Preferred Stock to be converted into shares of
Digital Common Stock prior to the Effective Time.
(ii) Vested Options Exercise Entitlement. The holders of
-----------------------------------
outstanding options to purchase shares of Digital Common Stock ("Options") under
the Digital Stock Plan (as defined in Section 2.5), to the extent vested
("Vested Options") may elect to exercise such Vested Options effective
immediately prior to the Effective Time by signing and delivering to Digital and
Agile, prior to the Effective Time, a written instrument in a form reasonably
satisfactory to Agile evidencing the agreement of such holder to receive upon
the Effective Time, in full consideration for the exercise of such Vested
Options and the agreement of such holder to surrender for cancellation the
Digital Common Stock to be received upon such exercise, the Merger Consideration
into which such Digital Common Stock are convertible in the Merger, less the
deductions described below in this Section 1.6(f)(ii). Such exercise form will
be accompanied by payment of the exercise price for such Vested Options in the
form of cash or the holder's full recourse demand promissory note payable to
Digital in the amount of the exercise price (a "Note"). The holder will
authorize Agile to withhold from the cash payable to the holder in the Merger
such amounts as Agile or Digital is required to withhold under applicable tax
laws. In addition, in the event a holder elects to pay the exercise price with a
Note, the holder shall also authorize Agile to deduct from the cash payable to
the holder in the Merger the amount due under such Note. To the extent that the
cash payable to the holder in the Merger is insufficient to pay the foregoing
amounts, the Note shall remain outstanding and shall continue to be due and
payable to the extent of the deficiency, with any portion of the deficiency that
exceeds the amount due under the Note to be added to the outstanding principal
under the Note. Any holder of Vested Options that elects to exercise his or her
Vested Options immediately prior to the Effective Time as contemplated by this
Section 1.6(f)(ii) shall be considered a Shareholder immediately prior to the
Effective Time and a Shareholder Indemnitor (as defined in Section 8.2 hereof)
for purposes of this Agreement (but not for purposes of voting on the Merger).
4
(iii) Assumption of Options. At the Effective Time, each
---------------------
outstanding Option, whether vested or unvested, granted under the Digital Stock
Plan shall be deemed to constitute an option (an "Assumed Option") to acquire,
on the same terms and conditions as were applicable under the Option, a number
of shares of Agile Common Stock equal to the number of shares of Digital Common
Stock that could have been purchased under the Option multiplied by the Option
Exchange Ratio (with the resulting number of shares being rounded to the nearest
whole share), at a price per share of Agile Common Stock equal to the option
exercise price (rounded up to the nearest whole cent) of the Option divided by
the Option Exchange Ratio (as defined below); provided, however, that in the
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case of any Option to which Section 422 of the Code applies ("Incentive Stock
Options"), the option price, the number of shares purchasable pursuant to such
option and the terms and conditions of exercise of such options shall be
determined in order to comply with Section 424(a) of the Code; provided further
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that, there shall be no accelerated exercisability of any unvested Option solely
as a result of the consummation of the Merger except for an aggregate of 42,500
shares under Options held by the optionees set forth in Schedule 1.6(f) attached
---------------
hereto in the amounts set opposite the name of each such optionee on the date
hereof; and provided further that, the holders of any Options shall be, pursuant
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to Section 5.9 hereof, required to enter into a Lock-Up Agreement (as defined in
Section 5.9) in connection with the Current Effective Registration (as defined
in Section 5.9) and a "lock-up" agreement in connection with Prospective
Effective Registrations (as defined in Section 5.9 hereof), under terms no more
restrictive under "lock-up" arrangement required of all Agile securityholders
holding a comparable number of shares of Agile Common Stock outstanding or under
an option or other security to purchase shares of Agile Common Stock entering
into such "lock-up" arrangements. For purposes of this Agreement, "Option
Exchange Ratio" shall mean and equal that number of shares of Agile Common Stock
obtained by (i) the quotient of $72,000,000 divided by the Deemed Closing Market
Price divided by (ii) the number of Total Outstanding Shares.
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(iv) Warrants. Digital shall take all necessary action
--------
such that, at the Effective Time, by virtue of the Merger and without any action
on the part of Merger Sub, Digital or any of the Shareholders or any holder of a
Warrant, each Warrant outstanding immediately prior to the Effective Time shall
be canceled and extinguished, and automatically converted into the right to
receive, upon surrender of the Warrant in the manner provided in Section 1.7(c)
hereof: (i) an amount of cash (without interest) equal to the Net Warrant Shares
multiplied by the Per Share Cash Consideration, and (ii) a number of shares
equal to the Net Warrant Shares multiplied by the Exchange Ratio, all upon the
terms and subject to conditions set forth below in this Section 1.6 and
throughout this Agreement, including, without limitation, the escrow provisions
set forth in Section 8 hereof. For purposes of this Section 1.6(f)(iv), "Net
Warrant Shares" shall mean, with respect to each Warrant, an amount equal to the
quotient obtained by dividing (i) product of (x) the Fair Market Value Per Share
minus the per share exercise price of such Warrant, multiplied by (y) the
aggregate number of shares of Digital Capital Stock issuable upon the exercise
in full of such Warrant (and subsequent conversion of the Digital Preferred
Stock to Digital Common Stock with respect to Warrants exercisable for Digital
Preferred Stock), by (ii) the Fair Market Value Per Share. For purposes of this
Section 1.6(f)(iv), the "Fair Market Value Per Share" shall equal the sum of (i)
the Actual Closing Market Price (as defined in Section 1.7(b) hereof) multiplied
by the Exchange Ratio plus (ii) the Per Share Cash Consideration. The exchange
procedures set forth in Section 1.7(c) shall apply to Warrants as appropriately
adjusted to give credit to the provisions of this
5
Section 1.6(f)(iv). For all purposes of Section 8 of this Agreement, the holders
of Warrants ("Warrantholders") shall be deemed to be Shareholders immediately
prior to the Effective Time and hence "Shareholder Indemnitors," as defined in
Section 8.2 hereof. For purposes of determining the portion of Indemnification
Shares (as defined in Section 1.7(j)) to be placed in escrow pursuant to Section
1.7(j) and of the Custody Shares (defined in Section 1.7(b)), the portion of the
Merger Consideration attributable to each Warrantholder shall be the portion of
the Aggregate Merger Consideration (defined in Section 1.7(b)) and Aggregate
Merger Share Consideration (defined in Section 1.7(b)) to which the
Warrantholder will be entitled subsequent to the conversion of such
Warrantholder's Warrants pursuant to Section 1.6(f)(iv) hereof.
(g) Dissenters' Rights. Dissenting Shares, if any, shall not be
------------------
converted into the Merger Consideration but shall instead be converted into the
right to receive such consideration as may be determined to be due with respect
to such Dissenting Shares pursuant to California Law. Digital shall give Agile
prompt notice of any demand received by Digital to require Digital to purchase
shares of Common Stock of Digital, and Agile shall have the right to direct (in
consultation with Digital prior to the Closing Date) and to participate in all
negotiations and proceedings with respect to such demand. Digital agrees that,
except with the prior written consent of Agile, which Agile shall not
unreasonably withhold or delay, or as required under the California Law, it will
not voluntarily make any payment with respect to, or settle or offer to settle,
any such purchase demand. Each holder of Dissenting Shares ("Dissenting
Shareholder") who, pursuant to the provisions of California Law, becomes
entitled to payment of the fair value for shares of Digital Capital Stock shall
receive payment therefor (but only after the value therefor shall have been
agreed upon or finally determined pursuant to such provisions). If, after the
Effective Time, any Dissenting Shares shall lose their status as Dissenting
Shares, Agile shall issue and deliver, upon surrender by such shareholder of a
certificate or certificates representing shares of Digital Capital Stock, the
Merger Consideration to which such shareholder would otherwise be entitled under
this Section 1.6 and the Certificate of Merger less the Merger Consideration
allocable to such shareholder that has been deposited in the Escrow Fund (as
defined below) in respect of such shares of Digital Common Stock pursuant to
Section 1.7(j) and Section 8 hereof and in custody pursuant to Section 1.7(k)
hereof.
1.7 Surrender of Certificates.
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(a) Exchange Agent. Boston EquiServe shall act as exchange agent
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(the "Exchange Agent") in the Merger.
(b) Agile to Provide Common Stock and Cash.
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(i) At, or within five business days after, the Effective Time,
Agile shall supply or cause to be supplied to the Exchange Agent for exchange in
accordance with this Section 1 through such reasonable procedures as Agile may
adopt (i) certificates evidencing the shares of Agile Common Stock issuable
pursuant to Section 1.6(a) in exchange for shares of Digital Capital Stock
outstanding immediately prior to the Effective Time and upon automatic
conversion of the Warrants pursuant to Section 1.6(f)(iv), less (x) the number
of shares of Agile Common Stock equal in value (based on the Actual Closing
Market Price, as hereafter defined) to 15% of the Aggregate Merger Consideration
(as hereafter defined), to be deposited into an escrow fund (the "Escrow Fund")
pursuant to the requirements of Section 1.7(j) and
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Section 8 and pursuant to the requirements of Section 1.7(k) and (y) for
purposes of maintaining the rights and fulfilling the obligations of each holder
of Digital Preferred Stock and each holder of Warrants to acquire shares of
Digital Preferred Stock pursuant to a Preferred Shareholders Registration Rights
and Obligations Agreement in the form attached as Exhibit C hereto (the
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"Preferred Registration Rights and Obligations Agreement"), a number of shares
of Agile Common Stock equal to 35% of the Aggregate Merger Share Consideration
to be placed in custody (the "Custody Shares") under the terms set forth under a
Transmittal Letter and Custodian Agreement (as defined and attached as Exhibit A
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to such Preferred Registration Rights and Obligations Agreement), (ii) cash in
an amount sufficient to pay the Per Share Cash Consideration which the
Shareholders are entitled to receive pursuant to Section 1.6(a) and the
Warrantholders are entitled to receive pursuant to Section 1.6(f)(iv), and (iii)
cash in an amount sufficient to permit payment of cash in lieu of fractional
shares pursuant to Section 1.6(f) (collectively, (i), (ii) and (iii) shall be
referred to as the "Exchange Fund").
(ii) For purposes of the Agreement, the terms set forth
below shall have the following meanings:
a) The term "Actual Closing Market Price" shall mean
the average of the closing price per share of Agile Common Stock as quoted on
the NASDAQ National Market System for the 10 consecutive trading days ending two
(2) trading days immediately prior to the Closing Date (such average to include
the closing price per share of Agile Common Stock of the first day of such two
trading days), as reported in the West Coast edition of the Wall Street Journal.
b) The term "Aggregate Merger Consideration" shall
mean the sum of (A) the product obtained by multiplying the Actual Closing
Market Price by the Aggregate Merger Share Consideration plus (B) $20,000,000.
c) The term "Aggregate Merger Share Consideration"
shall mean the number equal to the product obtained by multiplying the Exchange
Ratio by the Total Outstanding Shares.
(c) Exchange Procedures. Within five business (5) days following
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the Effective Time, the Surviving Corporation shall cause to be mailed to each
holder of record of a certificate or certificates (the "Certificates") which
immediately prior to the Effective Time represented outstanding shares of
Digital Common Stock, whose shares were converted into the right to receive
shares of Agile Common Stock and the Per Share Cash Consideration (and cash in
lieu of fractional shares) pursuant to Section 1.6 and each Warrantholder whose
Warrants were automatically converted pursuant to the provisions of Section
1.6(f)(iv), (i) a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates or Warrants (as the
case may be) shall pass, only upon receipt of the Certificates or Warrants (as
the case may be) by the Exchange Agent, and shall be in such form and have such
other provisions as Agile may reasonably specify), (ii) such other customary
documents as may be required pursuant to such instructions, and (iii)
instructions for use in effecting the surrender of the Certificates and Warrants
in exchange for certificates representing shares of Agile Common Stock and the
Per Share Cash Consideration (and cash in lieu of fractional shares). Upon
surrender of a Certificate or Warrant for cancellation to the Exchange Agent or
to such
7
other agent or agents as may be appointed by Agile, together with such letter of
transmittal and other documents, duly completed and validly executed in
accordance with the instructions thereto, the holder of such Certificate or
Warrant (as the case may be) shall be entitled to receive in exchange therefor
(A) a certificate representing the number of whole shares of Agile Common Stock
to which the holder is entitled to less the number of shares of Agile Common
Stock to be deposited in the Escrow Fund on such holder's behalf pursuant to
Sections 1.7(j) and 8 hereof (which number shall be based on the percentage of
Aggregate Merger Consideration received or attributed to such holder relative to
the total Aggregate Merger Consideration received or attributed to all
Shareholders and Warrantholders) and, with respect to the holders of former
shares of Digital Preferred Stock or former Warrants to acquire Digital
Preferred Stock, less such holders pro-rata portion (which shall be based on the
percentage of Aggregate Merger Share Consideration received or attributed to
such holder in respect of such holder's Digital Preferred Stock or Warrants to
acquire Digital Preferred Stock relative to the total Aggregate Merger Share
Consideration received or attributable to all holders in respect of all such
holders' Digital Preferred Stock and Warrants to acquire Digital Preferred
Stock) of the Custody Shares (if any) to be placed in custody pursuant to
Section 1.7(k), (B) any dividends or other distributions to which such holder is
entitled pursuant to Section 1.6(d), (C) the aggregate Per Share Cash
Consideration which the holder is entitled to, and (D) cash (without interest)
in respect of fractional shares as provided in Section 1.6(e) and the
Certificate or Warrant so surrendered shall forthwith be canceled. Until so
surrendered, each outstanding Certificate or Warrant that, prior to the
Effective Time, represented shares of Digital Capital Stock or the right to
acquire shares of Digital Capital Stock will be deemed from and after the
Effective Time, for all corporate purposes, other than the payment of dividends,
to evidence the ownership of the number of full shares of Agile Common Stock
into which such shares of Digital Capital Stock or Warrants shall have been so
converted and the right to receive an amount in cash in lieu of the issuance of
any fractional shares in accordance with Section 1.6. Agile shall use reasonable
best efforts to cause the Exchange Agent to issue to each Shareholder and
Warrantholder such Merger Consideration or consideration receivable upon
conversion of Warrants from the Exchange Fund within (5) business days after the
Exchange Agent receives all necessary documents from the Shareholder or
Warrantholder.
(d) Digital Restricted Stock. [Intentionally Deleted.]
------------------------
(e) Distributions With Respect to Unexchanged Shares. No dividends
------------------------------------------------
or other distributions with respect to Agile Common Stock with a record date
after the Effective Time will be paid to the holder of any unsurrendered
Certificate with respect to the shares of Agile Common Stock represented thereby
until the holder of record of such Certificate shall surrender such Certificate.
Subject to applicable law, following surrender of any such Certificate, there
shall be paid to the record holder of the certificates representing whole shares
of Agile Common Stock issued in exchange therefor, without interest at the time
of such surrender, the amount of any such dividends or other distributions with
a record date after the Effective Time theretofore payable (but for the
provisions of this Section 1.7(e)) with respect to such shares of Agile Common
Stock.
(f) Transfers of Ownership. At the Effective Time, the stock and
----------------------
Warrant transfer books of the Digital shall be closed and there shall be no
further registration of transfers of Digital Common Stock or Warrants thereafter
on the records of the Digital. If any
8
certificate for shares of Agile Common Stock and Per Share Cash Consideration
are to be issued in a name other than that in which the Certificate surrendered
in exchange therefor is registered, it will be a condition of the issuance
thereof that the Certificate so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Agile or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Agile Common Stock and Per Share Cash Consideration are in any name other than
that of the registered holder of the Certificate surrendered, or established to
the satisfaction of Agile or any agent designated by it that such tax has been
paid or is not payable. No shares of Agile Common Stock or cash shall be issued
other than in the name in which the Warrant is surrendered.
(g) Termination of Exchange Fund. Any portion of the Exchange Fund
----------------------------
which remains undistributed to the Shareholders or Warrantholders one year after
the Effective Time shall be delivered to Agile, upon demand, and any
Shareholders and Warrantholders who have not previously complied with this
Section 1.7 shall thereafter look only to Agile for payment of their claim for
the Merger Consideration or consideration receivable upon conversion of
Warrants, as the case may be, and any dividends or distributions with respect to
Agile Common Stock.
(h) No Liability. Notwithstanding anything to the contrary in this
------------
Section 1.7, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to any person for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(i) Dissenting Shares. The provisions of this Section 1.7 shall also
-----------------
apply to Dissenting Shares that lose their status as such, except that the
obligations of Agile under this Section 1.7 shall commence on the date of loss
of such status and the holder of such shares shall be entitled to receive in
exchange for such shares the Merger Consideration to which such holder is
entitled pursuant to Section 1.6 hereof.
(j) Escrow. As soon as practicable after the Effective Time, and
------
subject to and in accordance with the provisions of Section 8 hereof, Agile
shall cause to be deposited in Escrow (as defined in Section 8.1 hereof) with
the Escrow Agent (as defined in Section 8.1 hereof) the number of shares of
Agile Common Stock equal to the value (based on the Actual Closing Market Price)
of fifteen percent (15%) of the Aggregate Merger Consideration (the
"Indemnification Shares" or "Escrowed Consideration").
(k) Custody Shares. As soon as practicable after the Effective
--------------
Time, Agile shall cause the Custody Shares to be placed in custody pursuant to
the form of Letter of Transmittal and Custodian Agreement under the Preferred
Registration Rights and Obligations Agreement.
1.8 No Further Ownership Rights in Digital Capital Stock. The Merger
----------------------------------------------------
Consideration delivered upon the surrender for exchange of shares of Digital
Common Stock in accordance with the terms hereof (including any dividends,
distributions or cash paid in lieu of fractional shares) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Digital Common Stock, and there shall be no further registration of transfers on
9
the records of the Surviving Corporation of shares of Digital Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Section 1.
1.9 Lost, Stolen or Destroyed Certificates. In the event any
--------------------------------------
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof such Merger
Consideration (and dividends, distributions and cash in lieu of fractional
shares) as may be required pursuant to Section 1.6; provided, however, that
Agile may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct and will indemnify it
against any claim that may be made against Agile, the Surviving Corporation
and/or the Exchange Agent with respect to the Certificates alleged to have been
lost stolen or destroyed.
1.10 Tax and Accounting Consequences. It is intended by the parties
-------------------------------
hereto that the Merger shall constitute a reorganization within the meaning of
Section 368(a) of the Code and shall be accounted for as a purchase.
1.11 Certificate Legends. The shares of Agile Common Stock to be
-------------------
issued pursuant to Section 1 shall have been qualified or registered in
accordance with Section 5.8 hereof and shall only bear legends as relates to (i)
restrictions on the transfer of shares by "affiliates" of Agile and Digital
pursuant to Rule 144 of the Securities Act of 1933, as amended (the "Securities
Act"), to the extent required under Rule 144 itself or Rule 145 of the
Securities Act, as applicable pursuant to Section 5.8 hereof and (ii) the "lock-
up" period pursuant to the Lock-Up Agreement. Agile acknowledges that no holding
period under Rule 144 will apply to the shares of Agile Common Stock to be
issued pursuant to Section 1 hereof, if issued pursuant to the Fairness Hearing
(as defined in Section 2.30 hereof).
1.12 Taking of Necessary Action; Further Action. Each of Agile,
------------------------------------------
Merger Sub and Digital will take all such reasonable and lawful action as may be
necessary or desirable in order to effectuate the Merger in accordance with this
Agreement as promptly as possible. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
Digital and Merger Sub, the officers and directors of Digital and Merger Sub are
fully authorized in the name of their respective corporations or otherwise to
take, and will take, all such lawful and necessary action, so long as such
action is not inconsistent with this Agreement.
2. Representations and Warranties of Digital. Digital hereby represents
-----------------------------------------
and warrants to Agile that the statements contained in this Section 2 are true
and correct, except as set forth in the disclosure schedule delivered by Digital
to Agile on or before the date of this Agreement (the "Digital Disclosure
Schedule"). The Digital Disclosure Schedule and shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Section
2 and shall qualify only the corresponding paragraph in this Section 2 and any
other section hereof where it is reasonably clear, upon a reading of such
disclosure without any
10
independent knowledge on the part of the reader regarding the matter disclosed,
that the disclosure is intended to apply to such other section.
2.1 Organization, Standing and Power. Digital is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Digital has the corporate power to own its
properties and to carry on its business as now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified and in good standing would have a Material
Adverse Effect on Digital. Digital has delivered a true and correct copy of the
Articles of Incorporation and Bylaws or other charter documents, as applicable,
of Digital, each as amended to date, to Agile. Digital is not in violation of
any of the provisions of its Articles of Incorporation or Bylaws or equivalent
organizational documents. Digital does not directly or indirectly own any
equity or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity. Digital
does not have, nor has it ever had, any subsidiaries.
2.2 Authority. Digital has all requisite corporate power and authority to
---------
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Digital subject only to the approval of the
Merger by Digital's shareholders as contemplated by Section 6.1(a). The
affirmative vote of the holders of a majority of the shares of Digital's Common
Stock and Digital Preferred Stock outstanding on the record date for the Written
Consent of Shareholders relating to this Agreement, voting as separate classes,
is the only vote of the holders of any of Digital's Capital Stock necessary
under the Articles of Incorporation, as amended to date, and California Law to
approve this Agreement and the transactions contemplated hereby. The Board of
Directors of Digital (i) has unanimously approved this Agreement and the Merger
and determined that in its opinion the Merger is in the best interests of the
Shareholders and is on terms that are fair to such shareholders and (ii) will
recommend that the Shareholders approve this Agreement and the Merger. This
Agreement has been duly executed and delivered by Digital and constitutes the
valid and binding obligation of Digital enforceable against Digital in
accordance with its terms, except that such enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to creditors' rights generally, and is subject to general principles of equity.
The execution and delivery of this Agreement by Digital does not, and the
consummation of the transactions contemplated hereby will not conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any material obligation or loss of any material benefit under
(i) any provision of the Articles of Incorporation or Bylaws of Digital, as
amended, or (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument to which Digital is a party or by which its assets or
properties are bound, or any permit, concession, franchise, license, judgment,
order, decree, or, to Digital's knowledge, any statute, law, ordinance, rule or
regulation applicable to Digital or any of its properties or assets. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other
governmental authority or instrumentality ("Governmental Entity") is required by
or with respect to Digital in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) the filing of the Certificate of Merger, as
11
provided in Section 1.2; (ii) the filing by Agile of an application for
qualification by permit with the State of California pursuant to Section 25121
of the California Securities Act of 1968 (the "California Securities Act") or a
Registration Statement (defined in Section 5.8) to the extent such permit is not
issued by the State of California; (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state securities laws and the securities laws of any foreign country;
and (iv) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material Adverse
Effect on Digital and would not prevent, or materially alter or delay any of the
transactions contemplated by this Agreement.
2.3 Governmental Authorization. Digital has obtained each federal,
--------------------------
state, county, local or foreign governmental consent, license, permit, grant, or
other authorization of a Governmental Entity (i) pursuant to which Digital
currently operates or holds any interest in any of its properties or (ii) that
is required for the operation of Digital's business or the holding of any such
interest and all of such authorizations are in full force and effect except
where the failure to obtain or have any such authorizations could not reasonably
be expected to have a Material Adverse Effect on Digital.
2.4 Financial Statements. Digital has delivered to Agile its audited
--------------------
financial statements for each of the fiscal years ended March 31, 1997, March
31, 1998, and March 31, 1999, respectively, and its unaudited financial
statements (balance sheet, statement of operations and statement of cash flows)
on a consolidated basis as at and for the five-month period ended August 30,
1999 (collectively, the "Financial Statements"). The Financial Statements are
complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles (except that the
Financial Statements do not have notes thereto) applied on a consistent basis
throughout the periods indicated and with each other. The Financial Statements
fairly present the consolidated financial condition and operating results of
Digital as of the dates, and for the periods, indicated therein, subject to
normal year-end audit adjustments. Digital maintains and will continue, prior
to the Effective Time, to maintain a standard system of accounting established
and administered in accordance with generally accepted accounting principles
consistent with prior practice.
2.5 Capital Structure. The authorized capital stock of Digital
-----------------
consists of 30,000,000 shares of Digital Common Stock, of which there are
4,857,798 issued and outstanding shares as of the close of business on the date
hereof and 17,869,298 shares of Digital Preferred Stock, of which there are
issued on the date hereof 1,950,686 shares of Series A Preferred Stock,
6,138,484 shares of Series B Preferred Stock and 9,780,128 shares of Series C
Preferred Stock. All outstanding shares of Digital Common Stock and Digital
Preferred Stock are duly authorized, validly issued, fully paid and non-
assessable and are free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof, and are not subject
to preemptive rights or rights of first refusal created by statute, the Articles
of Incorporation or Bylaws of Digital or any agreement to which Digital is a
party or by which it is bound. Digital maintains the 1995 Stock Plan (the
"Digital Stock Plan"), pursuant to which there are outstanding on the date
hereof 1,894,625 options to purchase shares of Digital Common Stock and has
reserved an additional 1,105,375 shares of the Digital Common Stock for issuance
pursuant to options to be granted to employees, consultants and directors of
Digital. Section 2.5 of the Digital Disclosure Schedule sets forth a schedule
delivered by Digital to Agile
12
of a true and complete list as of the date hereof of all holders of outstanding
Options under the Digital Stock Plan, including the number of shares of Digital
Common Stock subject to each such Option, the vesting schedule, the exercise
price per share and the terms of each such Option. Except for the rights created
pursuant to this Agreement and the rights disclosed in the preceding sentence,
there are no other options, warrants, calls, rights, commitments or agreements
of any character to which Digital is a party or by which it is bound obligating
Digital to issue, deliver, sell, repurchase or redeem or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of Digital Capital Stock or
obligating Digital to grant, extend, accelerate the vesting of, change the price
of, or otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. There are no other contracts, commitments or agreements
relating to voting, purchase or sale of Digital Capital Stock (i) between or
among Digital and any of its Shareholders and (ii) to Digital's knowledge,
between or among any of its Shareholders, except for the Shareholders delivering
the Voting Agreements. All shares of outstanding Digital Common Stock and
Digital Preferred Stock were issued in compliance with all applicable federal
and state securities laws. Except for repurchases made by Digital from former
service providers of Digital pursuant to the terms of restricted stock purchase
agreements, Digital has not repurchased any shares of Digital Capital Stock.
There are no unvested shares of Digital Common Stock subject to a right of
repurchase by Digital ("Digital Restricted Stock") as of the date hereof nor
will there be any shares of Digital Restricted Stock outstanding immediately
prior to the Effective Time.
2.6 Absence of Certain Changes. Since August 30, 1999, (the
--------------------------
"Digital Balance Sheet Date"), Digital has conducted its business in the
ordinary course consistent with past practice and there has not occurred: (i)
any change, event or condition (whether or not covered by insurance) that has
resulted in, or might reasonably be expected to result in, a Material Adverse
Effect to Digital; (ii) any acquisition, sale or transfer of any material asset
of Digital other than in the ordinary course of business and consistent with
past practice; (iii) any change in accounting methods or practices (including
any change in depreciation or amortization policies or rates) by Digital or any
revaluation by Digital assets; (iv) any declaration, setting aside, or payment
of a dividend or other distribution with respect to the shares of Digital or any
direct or indirect redemption, purchase or other acquisition by Digital of any
of its shares of capital stock; (v) any material contract entered into by
Digital, other than in the ordinary course of business and as provided to Agile,
or any material amendment or termination of, or default under, any material
contract to which Digital is a party or by which it is bound; (vi) any amendment
or change to the Articles of Incorporation or Bylaws of Digital; (vii) any
increase in or modification of the compensation or benefits payable or to become
payable by Digital to any of its directors or employees other than customary
cost-of-living and customary merit increases in the ordinary course of business
consistent with past practice or (viii) any negotiation or agreement by Digital
to do any of the things described in the preceding clauses (i) through (vii)
(other than negotiations with Agile and its representatives regarding the
transactions contemplated by this Agreement). At the Effective Time, there will
be no accrued but unpaid dividends on shares of Digital Capital Stock.
2.7 Absence of Undisclosed Liabilities. Digital has no material
----------------------------------
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet for the period ended August 30, 1999 (the "Digital Balance
Sheet"), (ii) those incurred in the ordinary course of business and not required
13
to be set forth in the Digital Balance Sheet under generally accepted accounting
principles, (iii) those incurred in the ordinary course of business since the
Digital Balance Sheet Date and consistent with past practice; and (iv) those
incurred in connection with the execution of this Agreement. Notwithstanding the
foregoing, Digital has made available or delivered to Agile a list of all of its
accounts payable (invoiced or otherwise) and other liabilities outstanding as of
the date hereof.
2.8 Litigation. There is no private or governmental action, suit,
----------
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Digital, threatened
against Digital or any of its properties or any of its officers or directors (in
their capacities as such) or, to the knowledge of Digital, any basis therefor.
There is no judgment, decree or order against Digital, or, to the knowledge of
Digital, any of its directors or officers (in their capacities as such), or any
basis therefor, that could prevent, enjoin, or materially alter or delay any of
the transactions contemplated by this Agreement, or that could reasonably be
expected to have a Material Adverse Effect on Digital. All litigation to which
Digital is a party (or, to the knowledge of Digital, threatened to become a
party) is disclosed in the Digital Disclosure Schedule.
2.9 Restrictions on Business Activities. There is no agreement,
-----------------------------------
judgment, injunction, order or decree binding upon Digital which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any current business practice of Digital, any acquisition of property by Digital
or the conduct of business by Digital as currently conducted by Digital.
2.10 Intellectual Property.
---------------------
(a) For purposes of this Agreement, "Intellectual Property"
means:
(i) all issued patents, reissued or reexamined patents,
revivals of patents, utility models, certificates of invention, registrations of
patents and extensions thereof, regardless of country or formal name
(collectively, "Issued Patents");
(ii) all published or unpublished nonprovisional and
provisional patent applications, reexamination proceedings, invention
disclosures and records of invention (collectively "Patent Applications" and,
with the Issued Patents, the "Patents");
(iii) all copyrights, copyrightable works, semiconductor
topography and mask work rights, including all rights of authorship, use,
publication, reproduction, distribution, performance transformation, moral
rights and rights of ownership of copyrightable works, semiconductor topography
works and mask works, and all rights to register and obtain renewals and
extensions of registrations, together with all other interests accruing by
reason of international copyright, semiconductor topography and mask work
conventions (collectively, "Copyrights");
(iv) trademarks, registered trademarks, applications for
registration of trademarks, service marks, registered service marks,
applications for registration of service marks, trade names, registered trade
names and applications for registrations of trade names (collectively,
"Trademarks");
14
(v) all technology, ideas, inventions, designs, proprietary
information, manufacturing and operating specifications, know-how, formulae,
trade secrets, technical data, computer programs, hardware, software and
processes; and
(vi) all other intangible assets, properties and rights
(whether or not appropriate steps have been taken to protect, under applicable
law, such other intangible assets, properties or rights).
(b) Digital owns and has good and marketable title to, or
possess legally enforceable rights to use, all Intellectual Property used in the
business of Digital as currently conducted by Digital. The Intellectual Property
owned by or licensed to Digital collectively constitutes all of the Intellectual
Property necessary to enable Digital to conduct its business as such business is
currently being conducted.
(c) With respect to each item of Intellectual Property
incorporated into any product of Digital or otherwise used in the business of
Digital (except "off the shelf" or other software widely available through
regular commercial distribution channels at a cost not exceeding $25,000 on
standard terms and conditions, as modified for Digital's operations) ("Digital
Intellectual Property") the Digital Disclosure Schedule lists:
(i) all Issued Patents and Patent Applications and all
registered trademarks, and trademark applications and all registered copyrights,
including the jurisdictions in which each such Intellectual Property has been
issued or registered or in which any such application for such issuance and
registration has been filed; and
(ii) the following agreements relating to each of the
products of Digital (the "Digital Products") or other Digital Intellectual
Property: all (A) agreements granting any right to distribute or sublicense a
Digital Product on any exclusive basis, (B) any exclusive licenses of
Intellectual Property to or from Digital, (C) agreements pursuant to which the
amounts actually paid or payable under firm commitments to Digital for $25,000
or more, (D) joint development agreements, (E) any agreement by which Digital
grants any ownership right to any Digital Intellectual Property owned by
Digital, (F) any purchase order relating to Digital Intellectual Property, (G)
any option relating to any Digital Intellectual Property, and (H) agreements
pursuant to which any party is granted any rights to access source code or to
use source code to create derivative works of Digital Products.
(d) Section 2.10(d) of the Digital Disclosure Schedule contains
an accurate list as of the date of this Agreement of all licenses, sublicenses
and other agreements to which Digital is a party and pursuant to which Digital
is authorized to use any Intellectual Property owned by any third party
excluding "off the shelf" or other software at a cost not exceeding $25,000 and
widely available through regular commercial distribution channels on standard
terms and conditions, as modified for Digital's operations ("Third Party
Intellectual Property"). Digital has not been subject to an audit by the
Software Publishers Association as to any of its Third Party Intellectual
Property.
(e) To the knowledge of Digital, there is no unauthorized use,
disclosure, infringement or misappropriation of any Digital Intellectual
Property by any third
15
party, including any employee or former employee of Digital. Digital has not
entered into any agreement to indemnify any other person against any charge of
infringement of any Intellectual Property, other than indemnification provisions
contained in standard sales or license agreements to end users arising in the
ordinary course of business, the forms of which have been delivered to Agile or
its counsel. There are no royalties, fees or other payments payable by Digital
to any Person by reason of the ownership, use, sale or disposition of
Intellectual Property.
(f) Digital has not breached, or received in writing any claim or
threat that it has breached (i) any license, sublicense or other agreement (the
"License Agreements") to which it is a party relating to Digital Intellectual
Property or Third Party Intellectual Property involving more than $10,000 in
consideration in each such case, or (ii) any License Agreement in such a manner
as would permit any other party to cancel or terminate the same (with or without
notice of passage of time) or would provide a basis for any other party to claim
money damages (either individually or in the aggregate with all other such
claims) from Digital or give rise to a right of acceleration of any material
obligation or loss of any material benefit under any such License Agreement,
which in the aggregate could reasonably be expected to have a Material Adverse
Effect on Digital. Neither the execution, delivery or performance of this
Agreement or any ancillary agreement contemplated hereby nor the consummation of
the Merger or any of the transactions contemplated by this Agreement will
contravene, conflict with or result in an infringement on the Surviving
Corporation's right to own or use any Digital Intellectual Property, including
any Third Party Intellectual Property.
(g) All patents, registered trademarks, service marks and copyrights
held by Digital are valid and subsisting. All maintenance and annual fees have
been fully paid and all fees paid during prosecution and after issuance of any
patent comprising or relating to such item have been paid in the correct entity
status amounts. Excluding from consideration all "off the shelf" or other
software at a cost not exceeding $25,000 and widely available through regular
commercial distribution channels on standard terms and conditions, as modified
for Digital's operations, Digital is not infringing, misappropriating or making
unlawful use of any proprietary asset owned or used by any third party, and
Digital has received no notice or other communication (in writing or otherwise)
of any actual, alleged, possible or potential infringement, misappropriation or
unlawful use of any proprietary asset owned or used by any third party. There
is no proceeding pending or, to the knowledge of Digital, threatened, nor has
any claim or demand been made, which challenges the legality, validity,
enforceability or ownership of any item of Digital Intellectual Property or
Third Party Intellectual Property or alleges a claim of infringement of any
patents, trademarks, service marks, copyrights or violation of any trade secret
or other proprietary right of any third party. Digital has not brought a
proceeding alleging infringement of Digital Intellectual Property or breach of
any license or agreement involving Intellectual Property against any third
party.
(h) All current and former officers and employees of Digital who have
or had access to Digital's Intellectual Property have executed and delivered to
Digital an agreement regarding the protection of proprietary information and the
assignment to Digital of any Intellectual Property arising from services
performed for Digital by such persons, the form of which has been supplied to
Agile, and such form contains no exceptions or exclusions from the scope of its
coverage (except as set forth therein). All current and former consultants and
independent contractors to Digital involved in the development or modification
of Digital's
16
products (including those involved in supporting those products), and/or Digital
Intellectual Property have executed and delivered to Digital an agreement in the
form delivered to Agile, and such form contains no exceptions or exclusions from
the scope of its coverage (except as set forth therein). To Digital's knowledge,
no employee or independent contractor of Digital is in violation of any term of
any patent disclosure agreement or employment contract or any other contract or
agreement relating to the relationship of any such employee or independent
contractor with Digital. No current or former officer, director, stockholder,
employee, consultant or independent contractor has any right, claim or interest
in or with respect to any Digital Intellectual Property.
(i) Digital has taken commercially reasonable and customary measures
and precautions as necessary to protect and maintain the confidentiality of all
Digital Intellectual Property (except such Digital Intellectual Property whose
value would be unimpaired by public disclosure) and otherwise to maintain and
protect the full value of all material Intellectual Property it owns or uses.
Digital has not disclosed, either directly or through a third party,
Intellectual Property not otherwise protected by patents, patent applications or
copyright ("Confidential Information") owned by Digital to third parties for use
or appropriation by such third parties except pursuant to the terms of a written
agreement between Digital and such third parties and, to Digital's knowledge, no
disclosure, use or appropriation by or for a third party has occurred, either
through Digital or through a third party, without Digital's consent. All use,
disclosure or appropriation by Digital of Confidential Information not owned by
Digital has been pursuant to the terms of a written agreement between Digital
and the owner of such Confidential Information, or is otherwise lawful.
(j) No product liability claims have been communicated in writing to
or, to the knowledge of Digital, threatened against Digital.
(k) A complete list of each of the Digital Products and Digital's
proprietary software ("Digital Software"), together with a brief description of
each, is set forth in Section 2.10(k) of the Digital Disclosure Schedule. The
Digital Software and Digital Products conform in all material respects with any
published specification, documentation, or performance standard, as published
through any means, provided with respect thereto by or on behalf of Digital.
(l) Digital is not subject to any proceeding or outstanding decree,
order, judgment, or stipulation restricting in any manner the use, transfer, or
licensing thereof by Digital, or which may affect the validity, use or
enforceability of such Digital Intellectual Property. Digital is not subject to
any agreement which restricts in any material respect the use, transfer, or
licensing by Digital of the Digital Intellectual Property or Digital Products.
(m) All of Digital's products in the versions which are in present
commercial release, as listed on Section 2.10(k) of the Digital Disclosure
Schedule (i) accept input and provide output of data involving dates or portions
of dates before, during and after January 1, 2000 in a consistent, defined,
disclosed and unambiguous manner as to the appropriate century, (ii) manage,
store, manipulate, sort, sequence and perform calculations with respect to data
involving dates or portions of dates before, during and after January 1, 2000,
consistently and accurately, (iii) recognize, to the extent that such products
contain functionality
17
which requires the recognition of leap years generally, the year 2000 as a leap
year and (iv) operate continuously without material error, malfunction or
interruption caused by or resulting from the change of the centuries from 1999
to 2000, or the transition from any date in the twentieth or twenty-first
century to any other date in the twentieth or the twenty-first centuries, and
will record, store, process, calculate and present calendar dates falling on and
after (and if applicable, spans of time including) January 1, 2000
(collectively, "Year 2000 Compliant").
(n) To Digital's knowledge, all of the Digital's and its Information
Technology (as defined below) is Year 2000 Compliant, and will not cause a
material interruption in the ongoing operations of Digital's business as it is
presently conducted on or after January 1, 2000. For purposes of the foregoing,
the term "Information Technology" shall mean and include all software, hardware,
firmware, telecommunications systems, network systems, embedded systems and
other systems, components and/or services (other than general utility services
including gas, electric, telephone and postal) that are owned or used by Digital
in the conduct of its business.
2.11 Interested Party Transactions. Digital is not indebted to any
-----------------------------
director, officer, employee or agent of Digital (except for amounts due as
normal salaries and bonuses and in reimbursement of ordinary expenses), and no
such person is indebted to Digital. There have been no transactions which would
require disclosure if Digital were subject to disclosure under Item 404 of
Regulation S-K under the Securities Act.
2.12 Minute Books. The minute books of Digital made available to Agile
------------
contain a complete and accurate summary of actions taken by the board of
directors and the shareholders, whether at a meeting or by written consent since
the time of incorporation of Digital through the date of this Agreement, except
for such actions, if any, the omission of which is not material to Digital, its
Shareholders or its business, and reflect all transactions referred to in such
minutes accurately in all material respects.
2.13 Complete Copies of Materials. [Intentionally Deleted.]
----------------------------
2.14 Material Contracts. All the Material Contracts (as hereafter
------------------
defined) to which Digital is a party are listed in Section 2.14 of the Digital
Disclosure Schedule hereto. With respect to each agreement so listed: (i) the
agreement is legal, valid, binding and enforceable and in full force and effect,
and to Digital's knowledge is legal, valid, binding, enforceable and in full
force and effect with respect to each other party thereto, in either case
subject to the effect of bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and except as the
availability of equitable remedies may be limited by general principles of
equity; (ii) the agreement will continue to be legal, valid, binding and
enforceable and in full force and effect with respect to Digital immediately
following the Closing in accordance with the terms thereof as in effect prior to
the Closing, subject to the effect of bankruptcy, insolvency, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
except as the availability of equitable remedies may be limited by general
principles of equity; and (iii) neither Digital nor, to Digital's knowledge, any
other party, is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default by Digital or, to
Digital's knowledge, by
18
any such other party, or permit termination, modification or acceleration, under
the agreement. Digital is not a party to any oral contract, agreement or other
arrangement. "Material Contract" means any contract, agreement or commitment to
which Digital is a party (i) involving more than $10,000 in consideration in
each such case, or (ii) which if breached by Digital in such a manner as would
permit any other party to cancel or terminate the same (with or without notice
of passage of time) or would provide a basis for any other party to claim money
damages (either individually or in the aggregate with all other such claims
under that contract) from Digital or give rise to a right of acceleration of any
material obligation or loss of any material benefit under any such contract,
agreement or commitment which, if exercised, in the aggregate could reasonably
be expected to have a Material Adverse Effect on Digital.
2.15 Inventory. The inventories shown on the Financial Statements or
---------
thereafter acquired by Digital, were acquired and maintained in the ordinary
course of business, are of good and merchantable quality, and consist of items
of a quantity and quality usable or salable in the ordinary course of business.
Since the Digital Balance Sheet Date, Digital has continued to replenish
inventories in a normal and customary manner consistent with past practices.
Digital has not received notice that it will experience in the foreseeable
future any difficulty in obtaining, in the desired quantity and quality and at a
reasonable price and upon reasonable terms and conditions, the raw materials,
supplies or component products required for the manufacture, assembly or
production of its products. The values at which inventories are carried reflect
the inventory valuation policy of Digital, which is consistent with its past
practice and in accordance with generally accepted accounting principles applied
on a consistent basis. Digital is not under any liability or obligation with
respect to the return of any material item of inventory in the possession of
wholesalers, retailers or other customers.
2.16 Accounts Receivable. Subject to any reserves set forth in the
-------------------
Financial Statements, the accounts receivable shown on the Financial Statements
are valid and genuine, have arisen solely out of bona fide sales and deliveries
of goods, performance of services, and other business transactions in the
ordinary course of business consistent with past practices in each case with
persons other than affiliates, are not subject to any prior assignment, lien or
security interest and are not subject to valid defenses, set-offs or counter
claims.
2.17 Customers and Suppliers. As of the date hereof, no customer
-----------------------
which individually accounted for more than 5% of Digital's gross revenues during
the 12 month period preceding the date hereof and no supplier of Digital, has
canceled or otherwise terminated, or made any written threat to Digital to
cancel or otherwise terminate its relationship with Digital or has at any time
on or after the Digital Balance Sheet Date, decreased materially its services or
supplies to Digital in the case of any such supplier, or its usage of the
services or products of Digital in the case of such customer, and to Digital's
knowledge, no such supplier or customer has indicated either orally or in
writing that it will cancel or otherwise terminate its relationship with Digital
or to decrease materially its services or supplies to Digital or its usage of
the services or products of Digital, as the case may be. Digital has not
engaged in any fraudulent conduct with respect to, any customer or supplier of
Digital.
Section 2.17 of the Digital Disclosure Schedule sets forth all
customers which individually account for 5% or more of Digital's gross revenues
during the 12 month period (the "Revenue Period") preceding August 30, 1999,
specifically setting forth opposite such
19
customers' respective names (i) their gross revenue amounts during such Revenue
Period and (ii) the percentage of gross revenues attributable to such customers
during such Revenue Period.
2.18 Employees and Consultants. Section 2.18 of the Digital
-------------------------
Disclosure Schedule or a letter previously delivered by Digital to Agile
contains a list of the names of all present employees and consultants of Digital
and their respective salaries or wages, other compensation and dates of
employment or engagement.
2.19 Title to Property. Digital has good and marketable title to all
-----------------
of its respective properties, interests in properties and assets, real and
personal, reflected in the Digital Balance Sheet or acquired after the Digital
Balance Sheet Date (except properties, interests in properties and assets sold
or otherwise disposed of since the Digital Balance Sheet Date in the ordinary
course of business), or with respect to leased properties and assets, valid
leasehold interests therein, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except (i) the lien of current
taxes not yet due and payable, (ii) such imperfections of title, liens and
easements as do not and will not materially detract from or materially interfere
with the use of the properties subject thereto or affected thereby, or otherwise
materially impair business operations involving such properties and (iii) liens
securing debt which is reflected on the Digital Balance Sheet. The plants,
property and equipment of Digital that are used in the operations of their
businesses are in all material respects in good operating condition and repair,
subject to normal wear and tear. All properties used in the operations of
Digital are reflected in the Digital Balance Sheet to the extent generally
accepted accounting principles require the same to be reflected. All leases to
which Digital is a party are in full force and effect and are valid, binding and
enforceable on Digital and, to Digital's knowledge, on the other party, in
accordance with their respective terms, except as such enforceability may be
limited by (i) bankruptcy laws and other similar laws affecting creditors'
rights generally and (ii) general principles of equity, regardless of whether
asserted in a proceeding in equity or at law. True and correct copies of all
such leases have been provided to Agile. Digital owns no real property.
2.20 Environmental Matters.
---------------------
(a) The following terms shall be defined as follows:
(i) "Environmental Laws" shall mean any applicable foreign,
federal, state or local governmental laws (including common laws), statutes,
ordinances, codes, regulations, rules, policies, permits, licenses,
certificates, approvals, judgments, decrees, orders, directives, or requirements
that pertain to the protection of the environment, protection of public health
and safety, or protection of worker health and safety, or that pertain to the
handling, use, manufacturing, processing, storage, treatment, transportation,
discharge, release, emission, disposal, re-use, recycling, or other contact or
involvement with Hazardous Materials (defined below), including, without
limitation, the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601, et seq., as amended ("CERCLA"),
and the federal Resource Conservation and Recovery Act, 42 U.S.C. Section 6901,
et seq., as amended ("RCRA").
20
(ii) "Hazardous Materials" shall mean any material,
chemical, compound, substance, mixture, or by-product that is identified,
defined, designated, listed, restricted or otherwise regulated under
Environmental Laws (defined above) as a "hazardous constituent," "hazardous
substance," "hazardous material," "acutely hazardous material," "extremely
hazardous material," "hazardous waste," "hazardous waste constituent," "acutely
hazardous waste," "extremely hazardous waste," infectious waste," "medical
waste," "biomedical waste," "pollutant," "toxic pollutant," or "contaminant," or
any other formulation or terminology intended to classify or identify
substances, constituents, materials, or wastes by reason of properties that are
deleterious to the environment, natural resources, worker health and safety, or
public health and safety, including, without limitation, ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, and reproductive toxicity.
The term "Hazardous Materials" shall include, without limitation, any "hazardous
substances" as defined, listed, designated or regulated under CERCLA, any
"hazardous wastes" or "solid wastes" as defined, listed, designated or regulated
under RCRA, any asbestos or asbestos-containing materials, any polychlorinated
biphenyls, and any petroleum or hydrocarbonic substance, fraction, distillate,
or by-product.
(b) Digital is and has been in compliance with all Environmental
Laws relating to the properties or facilities used, leased, or occupied by
Digital at any time (collectively, "Digital's Facilities;" such properties or
facilities currently used, leased, or occupied by Digital are defined herein as
"Digital's Current Facilities"), and no discharge, emission, release, leak, or
spill of Hazardous Materials has occurred at any of Digital's Facilities which
may or will give rise to liability of Digital under Environmental Laws. To
Digital's knowledge, there are no Hazardous Materials (including, but not
limited to, asbestos) present in the surface waters, structures, groundwaters,
or soils of or beneath any of Digital's Current Facilities. To Digital's
knowledge, there neither are nor have been any aboveground or underground
storage tanks for Hazardous Materials at Digital's Current Facilities. To
Digital's knowledge, no Digital employee or other person has claimed that
Digital is liable for alleged injury or illness resulting from an alleged
exposure to a Hazardous Material. No civil, criminal or administrative action,
proceeding or investigation is pending against Digital, or to Digital's
knowledge, threatened against Digital, with respect to Hazardous Materials or
Environmental Laws, and Digital is not aware of any facts or circumstances which
could form the basis for assertion of a claim against Digital or which could
form the basis for liability of Digital, regarding Hazardous Materials or
regarding actual or potential non-compliance with Environmental Laws.
2.21 Taxes. As used in this Agreement, the terms "Tax" and,
-----
collectively, "Taxes" mean any and all federal, state and local taxes of any
country, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, stamp transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(a) Digital has prepared and timely filed all returns, estimates,
information statements and reports required to be filed with any taxing
authority ("Returns")
21
relating to any and all Taxes concerning or attributable to Digital or its
operations with respect to Taxes for any period ending on or before the Closing
Date and such Returns are true and correct in all material respects and have
been completed in accordance with applicable law.
(b) Digital, as of the Closing Date: (i) will have paid all Taxes
shown to be payable on such Returns covered by Section 2.21(a) and (ii) will
have withheld with respect to its employees all Taxes required to be withheld.
(c) There is no Tax deficiency outstanding or assessed or, to the best
of Digital's knowledge, proposed against Digital that is not reflected as a
liability on the Digital Balance Sheet nor has Digital executed any agreements
or waivers extending any statute of limitations on or extending the period for
the assessment or collection of any Tax.
(d) Digital has no liabilities for unpaid Taxes that have not been
accrued for or reserved on the Digital Balance Sheet, whether asserted or
unasserted, contingent or otherwise and Digital has no knowledge of any basis
for the assertion of any such liability attributable to each of Digital, its
assets or operations.
(e) Digital is not a party to any tax-sharing agreement or similar
arrangement with any other party, and Digital has not assumed to pay any Tax
obligations of, or with respect to any transaction relating to, any other person
or agreed to indemnify any other person with respect to any Tax.
(f) Digital's Returns have never been audited by a government or
taxing authority, nor is any such audit in process or pending, and Digital has
not been notified of any request for such an audit or other examination.
(g) Digital has never been a member of an affiliated group of
corporations filing a consolidated federal income tax return.
(h) Digital has disclosed to Agile (i) any Tax exemption, Tax holiday
or other Tax sparing arrangement that Digital has in any jurisdiction, including
the nature, amount and lengths of such Tax exemption, Tax holiday or other Tax-
sparing arrangement and (ii) any expatriate tax programs or policies affecting
Digital. Digital is in compliance with all terms and conditions required to
maintain such Tax exemption, Tax holiday or other Tax-sparing arrangement or
order of any governmental entity and the consummation of the transactions
contemplated hereby will not have any adverse effect on the continuing validity
and effectiveness of any such Tax exemption, Tax holiday or other Tax-sparing
arrangement or order.
(i) Digital has made available to Agile copies of all Returns filed by
Digital for all periods since their inception.
(j) Digital has never filed any consent agreement under Section 341(f)
of the Code or agreed to have Section 341(f)(4) apply to any disposition of
assets owned by Digital.
22
(k) Digital has never been a United States Real Property
Holding Corporation within the meaning of Section 897(c)(2) of the Code.
(l) Digital has not made any payments and is not required to
make any payment that will not be fully deductible due to the provisions of
Section 162(m) of the Code.
2.22 Employee Benefit Plans.
----------------------
(a) Section 2.22 of the Digital Disclosure Schedule contains
a complete and accurate list of each plan, program, policy, practice, contract,
agreement or other arrangement providing for employment, compensation, deferred
compensation, loans, severance, separation, relocation, repatriation,
expatriation, visas, work permits, termination pay, performance awards, bonus,
incentive, stock option, stock purchase, stock bonus, phantom stock, stock
appreciation right, supplemental retirement, fringe benefits, cafeteria
benefits, or other benefits, whether written or unwritten, including, without
limitation, each "employee benefit plan" within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA") which
is or has been sponsored, maintained, contributed to, or required to be
contributed to by Digital and any trade or business (whether or not
incorporated) which is treated as a single employer with Digital within the
meaning of Section 414(b), (c), (m) or (o) of the Code (an "ERISA Affiliate),
for the benefit of any person who performs or who has performed services for
Digital or with respect to which Digital or ERISA Affiliate has or may have any
liability or obligation (collectively, the "Digital Employee Plans"). In
addition, Section 2.22 of the Digital Disclosure Schedule lists each Digital
Employee Plan that has been adopted or maintained by Digital, whether formally
or informally, for the benefit of employees outside the United States ("Digital
International Employee Plans"). There has been no amendment to, written
interpretation or announcement by Digital or ERISA Affiliate which would
materially increase the expense of maintaining any Digital Employee Plan above
the level of expense incurred with respect to such Digital Employee Plan for the
most recent fiscal year included in Digital's financial statements.
(b) Documents. Digital has furnished to Agile true and
---------
complete copies of documents embodying each of the Digital Employee Plans and
related plan documents, including, without limitation, to the extent such
documents exist, trust documents, group annuity contracts, plan amendments,
insurance policies or contracts, participant agreements, employee booklets,
administrative service agreements, summary plan descriptions, compliance and
nondiscrimination tests for the last three plan years, standard COBRA forms and
related notices, registration statements and prospectuses, and, to the extent
still in its possession, any material employee communications relating thereto.
With respect to each Digital Employee Plan which is subject to ERISA reporting
requirements, Digital has provided copies of the Form 5500 reports filed for the
last three (3) plan years. Digital has furnished Agile with the most recent
Internal Revenue Service determination or opinion letter issued with respect to
each such Digital Employee Plan, and nothing material has occurred since the
issuance of each such letter which could reasonably be expected to cause the
loss of the tax-qualified status of any Digital Employee Plan subject to Code
Section 401(a).
(c) Compliance. (i) Each Digital Employee Plan has been
----------
administered in accordance with its terms and in compliance with the
requirements prescribed by
23
any and all statutes, rules and regulations (including ERISA and the Code) which
are applicable to it, except as would not have, in the aggregate, a Material
Adverse Effect, and Digital or ERISA Affiliate have performed all material
obligations required to be performed by them under, are not in material respect
in default under or violation of and have no knowledge of any material default
or violation by any other party to, any of the Digital Employee Plans; (ii) any
Digital Employee Plan intended to be qualified under Section 401(a) of the Code
has either obtained from the Internal Revenue Service a favorable determination,
opinion advisory or notification letter, as applicable, to its qualified status
under the Code, including all amendments to the Code effected by the Tax Reform
Act of 1986 and subsequent legislation, or has applied to the Internal Revenue
Service for such a determination letter, if applicable, prior to the expiration
of the requisite period under applicable Treasury Regulations or Internal
Revenue Service pronouncements in which to apply for such determination letter
and to make any amendments necessary to obtain a favorable determination, or has
been established under a standardized prototype plan for which an Internal
Revenue Service opinion letter has been obtained by the plan sponsor and is
valid as to the adopting employer; (iii) none of the Digital Employee Plans
promises or provides retiree medical benefits to any person other than as
required by law, (iv) there has been no "prohibited transaction," (other than
exempt prohibited transactions) as such term is defined in Section 406 of ERISA
and Section 4975 of the Code, with respect to any Digital Employee Plan, which
could reasonably be expected to have, in the aggregate, a Material Adverse
Effect; (v) neither Digital nor any ERISA Affiliate is subject to any liability
or penalty under Sections 4976 through 4980 of the Code or Title I of ERISA with
respect to any of the Digital Employee Plans; (vi) all contributions required to
be made by Digital or ERISA Affiliate to any Digital Employee Plan have been
made on or before their due dates and a reasonable amount has been accrued for
contributions to each Digital Employee Plan as applicable for the current plan
years; (vii) with respect to each Digital Employee Plan, no "reportable event"
within the meaning of Section 4043 of ERISA (excluding any such event for which
the thirty (30) day notice requirement has been waived under the regulations to
Section 4043 of ERISA) nor any event described in Section 4062, 4063 or 4041 or
ERISA has occurred; (viii) each Digital Employee Plan subject to ERISA, has
prepared in good faith and timely filed all requisite governmental reports
(which were true and correct as of the date filed) and has properly and timely
filed and distributed or posted all notices and reports to employees required to
be filed, distributed or posted with respect to each such Digital Employee Plan;
and (ix) no suit, administrative proceeding, action or other litigation has been
brought, or to the knowledge of Digital is threatened, against or with respect
to any such Digital Employee Plan, including any audit or inquiry by the IRS or
United States Department of Labor.
(d) No Title IV or, Multiemployer Plan. Neither Digital nor any ERISA
----------------------------------
Affiliate has ever maintained, established, sponsored, participated in,
contributed to, or otherwise incurred any obligation or liability (including
without limitation, contingent liability) under any "multiemployer plan" (as
defined in Section 3(37) of ERISA) or to any "pension plan" (as defined in
Section 3(2) of ERISA) subject to Title IV of ERISA or Section 412 of the Code.
Neither Digital nor any ERISA Affiliate has any actual or potential withdrawal
liability (including without limitation, any contingent liability) for any
complete or partial withdrawal (as defined in Sections 4203 and 4205 of ERISA)
from any multiemployer plan.
(e) COBRA, FMLA, HIPAA, CANCER RIGHTS. With respect to each Digital
---------------------------------
Employee Plan, Digital has complied with (i) the applicable health care
continuation
24
and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA") and the regulations thereunder; (ii) the applicable requirements
of the Family and Medical Leave Act of 1993 and the regulations thereunder;
(iii) the Health Insurance Portability and Accountability Act ("HIPAA") and (iv)
the Cancer Rights Act of 1998 except to the extent that such failure to comply
would not in the aggregate, have a Material Adverse Effect. Digital has no
material unsatisfied obligations to any employees, former employees, or
qualified beneficiaries pursuant to COBRA, HIPAA, or any state law governing
health care coverage extension or continuation.
(f) Effect of Transaction. The consummation of the transactions
---------------------
contemplated by this Agreement will not (i) entitle any current or former
employee or other service provider of Digital or any ERISA Affiliate to
severance benefits or any other payment (including, without limitation,
unemployment compensation, golden parachute bonus or benefits under any Digital
Employee Plan), except as expressly provided in this Agreement or (ii)
accelerate the time of payment or vesting of any such benefits, or increase the
amount of compensation due any such employee or service provider (other than
full or partial vesting as a result of the actions required under the
Agreement). No benefit payable or which may become payable by Digital pursuant
to any Digital Employee Plan or as a result of or arising under this Agreement
shall constitute an "excess parachute payment" (as defined in Section 280G(b)(1)
of the Code) which is subject to the imposition of an excise Tax under Section
4999 of the Code or the deduction for which would not be disallowed by reason of
Section 280G of the Code. Each Digital Employee Plan can be amended, terminated
or otherwise discontinued after the Effective Time in accordance with its terms,
without material liability to Acquirer or Digital (other than ordinary
administration expenses typically incurred in a termination event).
(g) International Employee Plans. Each Digital International Employee
----------------------------
Plan has been established, maintained and administered in material compliance
with its terms and conditions and with the requirements prescribed by any and
all statutory or regulatory laws that are applicable to such International
Digital Employee Plan. No Digital International Employee Plan has unfunded
liabilities, that as of the Effective Time, will not be offset by insurance or
fully accrued. Except as required by law, no condition exists that would
prevent Digital or Agile from terminating or amending any International Digital
Employee Plan at any time for any reason.
2.23 Employee Matters. Digital is in compliance with all currently
----------------
applicable laws and regulations respecting terms and conditions of employment
including, without limitation, applicant and employee background checking,
immigration laws, discrimination laws, verification of employment eligibility,
employee leave laws, classification of workers as employees and independent
contractors, wage and hour laws, and occupational safety and health laws, except
for such noncompliance that neither has, nor reasonably would be expected to
have, a Material Adverse Effect on Digital. There are no proceedings pending
or, to Digital's knowledge, threatened, between Digital, on the one hand, and
any or all of its current or former employees, on the other hand, which
proceedings have, or would reasonably be expected to have, a Material Adverse
Effect on Digital, including, but not limited to, any claims for actual or
alleged harassment or discrimination based on race, national origin, age, sex,
sexual orientation, religion, disability, or similar tortious conduct, breach of
contract, wrongful termination, defamation, intentional or negligent infliction
of emotional distress, interference with contract or
25
interference with actual or prospective economic disadvantage. There are no
claims pending, or, to Digital's knowledge, threatened, against Digital under
any workers' compensation or long term disability plan or policy. Digital is not
a party to any collective bargaining agreement or other labor union contract,
nor does Digital know of any activities or proceedings of any labor union to
organize its employees. Digital has provided all employees with all wages,
benefits, relocation benefits, stock options, bonuses and incentives, and all
other compensation earned up through the date of this Agreement, except for
those accrued and not yet due.
2.24 Insurance. Digital has policies of insurance and bonds of the
---------
type and in amounts customarily carried by persons conducting businesses or
owning assets similar to those of Digital. There is no material claim pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and Digital is
otherwise in compliance with the terms of such policies and bonds. Digital has
no knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
2.25 Compliance With Laws. Each of Digital has complied with, is not
--------------------
in violation of and has not received any notices of violation with respect to,
any federal state, local or foreign statute, law or regulation with respect to
the conduct of its business, or the ownership or operation of its business.
2.26 Brokers' and Finders' Fees. Except for fees payable to
--------------------------
Broadview International LLC, Digital has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or investment bankers' fees or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
2.27 Bank Accounts. Section 2.27 of the Digital Disclosure Schedule
-------------
sets forth the names and locations of all banks and other financial institutions
at which Digital maintains accounts of any nature, the type of accounts
maintained at each such institution and the names of all persons authorized to
draw thereon or make withdrawals therefrom.
2.28 Indemnification Claims. Section 2.28 of the Digital Disclosure
----------------------
Schedule sets forth a list of all persons who are parties to director, officer
and/or employee indemnification agreements with Digital (the "Indemnification
Agreements"). Except as set forth in Section 2.28 of the Digital Disclosure
Schedule, there are no outstanding claims under any of the Indemnification
Agreements or under any indemnification rights granted pursuant to the Articles
of Incorporation or Bylaws of Digital (as currently in effect); and to the best
of Digital's knowledge, there are no facts or circumstances which would
reasonably be expected to provide a basis for a claim under any such
Indemnification Agreement or under any indemnification rights granted pursuant
to the Articles of Incorporation or Bylaws of Digital.
2.29 Power of Attorney. Except as set forth in Section 2.29 of the
-----------------
Digital Disclosure Schedule, Digital has not granted to any person a power of
attorney or similar authorization that is currently in effect of authority.
2.30 Permit Application; Information Statement. The information
-----------------------------------------
supplied by Digital for inclusion in the application for issuance of a permit
(the "Permit Application")
26
pursuant to Section 25121 of the California Securities Act and information
statement to be sent to the holders of Digital Shares to consider the Merger
(such information statement as amended or supplemented is referred to herein as
the "Information Statement"), will not, on the date the fairness hearing is held
pursuant to Section 25142 of the California Securities Act (the "Fairness
Hearing"), on the date the Information Statement is first mailed to the
Shareholders, or at the Effective Time, contain any statement which, at such
time and in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or shall omit to state any
material fact necessary in order to make the statements made therein not false
or misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the Permit Application or
the consent solicitation which has become false or misleading. Notwithstanding
the foregoing, Digital makes no representation or warranty with respect to any
information supplied by Agile or Merger Sub which is contained in any of the
foregoing documents.
2.31 Representations Complete. None of the representations or
------------------------
warranties made by Digital herein or in any Schedule or Exhibit hereto,
including the Digital Disclosure Schedule, or certificate furnished by Digital
pursuant to this Agreement when all such documents are read together in their
entirety, contain, or will contain at the Effective Time any untrue statement of
a material fact, or omits or will omit at the Effective Time to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading.
3. Representations and Warranties of Agile and Merger Sub. Agile and
------------------------------------------------------
Merger Sub hereby represent and warrant to Digital that the statements contained
in this Section 3 are true and correct, except as set forth in the disclosure
schedule delivered by Agile to Digital on or before the date of this Agreement
(the "Agile Disclosure Schedule"). The Agile Disclosure Schedule and shall be
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Section 3 and shall qualify only the corresponding paragraph
in this Section 3 and any other Section hereof where it is reasonably clear,
upon a reading of such disclosure without any independent knowledge on the part
of the reader regarding the matter disclosed, that the disclosure is intended to
apply to such other section.
3.1 Organization, Standing and Power. Each of Agile and Merger Sub
--------------------------------
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. Each of Agile and Merger Sub has the
corporate power to own its properties and to carry on its business as now being
conducted and as proposed to be conducted and is duly qualified to do business
and is in good standing in each jurisdiction in which the failure to be so
qualified and in good standing would have a Material Adverse Effect on Agile.
Agile has made available a true and correct copy of the Certificate of
Incorporation and Bylaws or other charter documents, as applicable, of Agile and
Merger Sub, each as amended to date, to Digital. Neither Agile nor Merger Sub
is in violation of any of the provisions of its Certificate of Incorporation or
Bylaws or equivalent organizational documents.
3.2 Authority. Agile and Merger Sub have all requisite corporate
---------
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been, or will
have been by the Closing, duly authorized by all
27
necessary corporate action on the part of Agile and Merger Sub. The Boards of
Directors of Agile and Merger Sub have (i) unanimously approved this Agreement
and the Merger and (ii) determined that in their respective opinions the Merger
is in the best interests of the stockholders of Agile and Merger Sub,
respectively. This Agreement has been duly executed and delivered by Agile and
Merger Sub and constitutes the valid and binding obligations of Agile and Merger
Sub, enforceable against each of them in accordance with its terms, except that
such enforceability may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to creditors' rights generally, and is
subject to general principles of equity. The execution and delivery of this
Agreement do not and the consummation of the transactions contemplated hereby
will not conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any material obligation or loss of
a material benefit under (i) any provision of the Certificate of Incorporation
or Bylaws of Agile or any of its subsidiaries, as amended, or (ii) any material
mortgage, indenture, lease, contract or other agreement or instrument permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Agile or any of its subsidiaries or
any of their properties or assets. No consent approval, order or authorization
of or registration, declaration or filing with any Governmental Entity is
required by or with respect to Agile or any of its subsidiaries in connection
with the execution and delivery of this Agreement by Agile and Merger Sub or the
consummation by Agile and Merger Sub of the transactions contemplated hereby,
except for (i) the Certificate of Merger in Delaware as provided in Section 1.2,
(ii) the filing by Agile of an application for qualification by permit with the
State of California pursuant to Section 25121 of the California Securities Act,
(iii) the filing, if any, of a Form 8-K with the Securities and Exchange
Commission ("SEC") and National Association of Securities Dealers ("NASD"), (iv)
the issuance of a permit qualifying the issuance of the Agile Common Stock after
a Fairness Hearing before the California Department of Corporations or, to the
extent that such permit is not issued by the State of California, the filing of
a Registration Statement (defined in Section 5.8), (v) any filings as may be
required under applicable state securities laws and the securities laws of any
foreign country, (vi) the filing with the NASDAQ National Market of a
Notification Form for Listing of Additional Shares with respect to the shares of
Agile Common Stock issuable upon conversion of the Digital Common Stock in the
Merger, and (vii) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material Adverse
Effect on Agile and would not prevent, materially alter or delay any of the
transactions contemplated by this Agreement.
3.3 SEC Documents; Financial Statements. Agile has made available to
-----------------------------------
Digital all statements, reports, registration statements and other filings filed
with the SEC by Agile since June 23, 1999 ("▇▇▇▇▇ Filings"), and, prior to the
Effective Time, Agile will have made available to Digital any additional ▇▇▇▇▇
Filings prior to the Effective Time (collectively together with the documents
described in the following sentence, the "Agile SEC Documents") and will
promptly make available to Digital all exhibits to any additional Agile SEC
Documents filed prior to the Effective Time. All documents required to be filed
as exhibits to the Agile SEC Documents have been so filed, and all material
contracts so filed as exhibits are in full force and effect except those which
have expired in accordance with their terms, and neither Agile nor any of its
subsidiaries is in default thereunder. As of their respective filing dates, the
Agile SEC Documents complied in all material respects with the requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
Securities Act and none of the Agile SEC
28
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected by a subsequently filed Agile SEC
Document prior to the date hereof. Agile has filed each Agile SEC Document on or
before the applicable filing deadline for such document and Agile is not
currently and, immediately prior to the Effective Time, will not be untimely in
its filing of any document which is required to be filed with the SEC or
otherwise not in compliance with any SEC filing or reporting requirement. The
financial statements of Agile, including the notes thereto, included in the
Agile SEC Documents (the "Agile Financial Statements"), complied as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto as of their
respective dates, and have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent throughout the periods
indicated and consistent with each other (except as may be indicated in the
notes thereto or, in the case of unaudited statements included in Quarterly
Reports on Form 10-Qs, as permitted by Form 10-Q of the SEC). The Agile
Financial Statements fairly present the consolidated financial condition and
operating results of Agile and its subsidiaries at the dates and during the
periods indicated therein (subject, in the case of unaudited statements, to
normal, recurring yearend adjustments). There has been no change in Agile
accounting policies except as described in the notes to the Agile Financial
Statements.
3.4 Capital Structure. The authorized capital stock of the Agile is
-----------------
(i) 100,000,000 shares of Common Stock and (ii) 10,000,000 shares of preferred
stock, and as of the close of business on October 1, 1999, 20,701,988 shares of
Agile Common Stock, and no shares of Agile preferred stock, were issued and
outstanding. There are no other outstanding shares of capital stock or voting
securities of Agile other than shares of Agile Common Stock issued after October
1, 1999, upon the exercise of stock options under Agile's 1999 Stock Option Plan
(the "Agile Stock Option Plan"). The authorized capital stock of Merger Sub
consists of 1,000 shares of Common Stock, 1,000 of which are issued and
outstanding and all of which are held by Agile. As of the close of business on
October 1, 1999, Agile has reserved 3,038,444 shares of Agile Common Stock
pursuant to the Agile Stock Option Plan, of which 1,790,525 shares are subject
to outstanding, unexercised options. Except as set forth above, there are no
other options, warrants, calls, rights, commitments or agreements of any
character to which Agile or Merger Sub is a party or by which either of them is
bound obligating Agile or Merger Sub to issue, deliver, sell, repurchase or
redeem or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the capital stock of Agile or Merger Sub or obligating Agile or Merger
Sub to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement. The shares of Agile Common Stock to be issued pursuant
to the Merger will be duly authorized, validly issued, fully paid and
unassessable.
3.5 Interim Operations of Merger Sub. Merger Sub was formed solely
--------------------------------
for the purpose of engaging in the transactions contemplated by this Agreement,
has engaged in no other business activities and has conducted its operations
only as contemplated by this Agreement.
3.6 Permit Application; Information Statement. The information
-----------------------------------------
supplied by Agile for inclusion in the Permit Application and the Information
Statement, will not, on the date of the Fairness Hearing, on the date the
Information Statement is first mailed to the Shareholders, or at the Effective
Time, contain any statement which, at such time and in light of the
29
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or shall omit to state any material fact necessary in
order to make the statements made therein not false or misleading, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the Permit Application or the consent solicitation
which has become false or misleading. Notwithstanding the foregoing, Agile
makes no representation or warranty with respect to any information supplied by
Digital which is contained in any of the foregoing documents.
3.7 Capital Resources. Agile has sufficient capital resources to pay
-----------------
the $20,000,000 cash amount of the aggregate Per Share Cash Consideration.
3.8 Representations Complete. None of the representations or
------------------------
warranties made by Agile or Merger Sub herein or in any Schedule hereto,
including the Agile Disclosure Schedule, or certificate furnished by Agile or
Merger Sub pursuant to this Agreement, or the Agile SEC Documents, or any
written statement furnished to Digital pursuant hereto or in connection with the
transactions contemplated hereby, when all such documents are read together in
their entirety, contains or will contain at the Effective Time any untrue
statement of a material fact or omits or will omit at the Effective Time to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
4. Conduct Prior To The Effective Time.
-----------------------------------
4.1 Conduct of Business of Digital. During the period from the date
------------------------------
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Digital agrees, except to the extent that Agile
shall otherwise consent in writing, which consent shall not be unreasonably
withheld, to carry on Digital's business in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted, to pay the
debts and Taxes of Digital when due, to pay or perform other obligations when
due, and, to the extent consistent with such business, use its reasonable best
efforts consistent with past practice and policies to preserve intact Digital's
present business organizations, keep available the services of Digital's present
officers and key employees and preserve Digital's relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it, all with the goal of preserving unimpaired Digital's goodwill
and ongoing businesses at the Effective Time. Digital shall promptly notify
Agile of any event or occurrence or emergency not in the ordinary course of
business of Digital and any material event involving Digital. Except as
expressly contemplated by this Agreement as set forth in Section 4.1 of the
Digital Disclosure Schedule, Digital shall not, without the prior written
consent of Agile, which consent shall not be unreasonably withheld:
(a) Material Contracts. Enter into any material contract or
------------------
commitment, or violate, amend or otherwise modify or waive any of the terms of
any of its material contracts, other than in the ordinary course of business
consistent with past practice;
(b) Issuance of Securities. Issue, deliver or sell or authorize
----------------------
or propose the issuance, delivery or sale of, or purchase or propose the
purchase of, any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to
30
acquire, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities other than the issuance of
shares of its Common Stock pursuant to the exercise of stock options, warrants
or other rights therefor outstanding as of the date of this Agreement;
(c) Intellectual Property. Transfer to any person or entity any
---------------------
rights to its Intellectual Property other than in the ordinary course of
business consistent with past practice;
(d) Exclusive Rights. Enter into or amend any agreements pursuant to
----------------
which any other party is granted exclusive marketing or other exclusive rights
of any type or scope with respect to any of Digital Products or Digital
Intellectual Property;
(e) Dispositions. Sell, lease, license or otherwise dispose of or
------------
encumber any of its properties or assets which are material individually or in
the aggregate, to its business, taken as a whole, except in the ordinary course
of business consistent with past practice;
(f) Indebtedness. Incur any indebtedness for borrowed money or
------------
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others; provided, however, that Digital may
allow holders of options under the Digital Stock Option Plan to purchase Digital
Common Stock upon exercise thereof with interest bearing promissory notes;
(g) Agreements. Enter into, terminate or amend, in a manner which
----------
will adversely affect the business of Digital (i) any agreement involving an
obligation to pay or the right to receive $10,000 or more, (ii) any agreement
relating to the license, transfer or other disposition or acquisition of
Intellectual Property rights or rights to market or sell Digital Products, or
(iii) any other agreement which is material to the business or prospects of
Digital;
(h) Payment of Obligations. Pay, discharge or satisfy in an amount in
----------------------
excess of $10,000 in the aggregate, any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise) arising
other than in the ordinary course of business, other than the payment, discharge
or satisfaction of liabilities reflected or reserved against in the Digital
Financial Statements;
(i) Capital Expenditures. Make any capital expenditures, capital
--------------------
additions or capital improvements except in the ordinary course of business and
consistent with past practice;
(j) Insurance. Materially reduce the amount of any material insurance
---------
coverage provided by existing insurance policies;
(k) Termination or Waiver. Terminate or waive any right of
---------------------
substantial value, other than in the ordinary course of business;
(l) Employee Benefit Plans; New Hires; Pay Increases. Amend any
------------------------------------------------
Digital Employee Plan or adopt any plan that would constitute a Digital Employee
Plan or hire
31
any new officer level employee, pay any special bonus, special remuneration or
special noncash benefit (except payments and benefits made pursuant to written
agreements outstanding on the date hereof), or increase the benefits, salaries
or wage rates of its employees except in the ordinary course of business in
accordance with its standard past practice;
(m) Severance Arrangements. Grant any severance or termination pay or
----------------------
benefits (i) to any director or officer or (ii) to any other employee except (A)
payments made pursuant to written agreements outstanding on the date hereof or
(B) grants which are made in the ordinary course of business in accordance with
its standard past practice;
(n) Lawsuits. Commence a lawsuit other than (i) for the routine
--------
collection of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with Agile prior to the filing
of such a suit, or (iii) for a breach of this Agreement;
(o) Acquisitions. Acquire or agree to acquire by merging or
------------
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof or otherwise acquire or agree
to acquire any assets which are material individually or in the aggregate to its
business, taken as a whole;
(p) Taxes. Other than in the ordinary course of business, make or
-----
change any material election in respect of Taxes, adopt or change any accounting
method in respect of Taxes, file any material Tax Return or any amendment to a
material Tax Return, enter into any closing agreement, settle any material claim
or assessment in respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any material claim or assessment in respect of
Taxes;
(q) Revaluation. Revalue any of its assets, including without
-----------
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business;
(r) Other. Take or agree in writing or otherwise to take, any of the
-----
actions described in Sections 4.1(a) through (q) above, or any action which
would cause a material breach of its representations or warranties contained in
this Agreement or prevent it from materially performing or cause it not to
materially perform its covenants hereunder.
4.2 No Solicitation. Until the earlier of (i) the Effective Time, or
---------------
(ii) the date of termination of this Agreement pursuant to the provisions of
Section 7 hereof, Digital shall not (nor shall Digital permit, as applicable,
any of Digital's officers, directors, employees, shareholders, agents,
representatives or affiliates to), directly or indirectly, take any of the
following actions with any party other than Agile and its designees: (a)
solicit, encourage, initiate or participate in any inquiry, negotiations or
discussions, or enter into any agreement, with respect to any offer or proposal
to acquire all or any material part of Digital's business, properties or
technologies, or any material amount of Digital's Capital Stock, whether by
merger, purchase of assets, tender offer or otherwise, or effect any such
transaction, (b) disclose any information not customarily disclosed to any
person concerning Digital's business, technologies
32
or properties, or afford to any person or entity access to its properties,
technologies, books or records, not customarily afforded such access, (c) assist
or cooperate with any person to make any proposal to purchase all or any
material part of Digital Capital Stock, any of its capital stock or assets of
the Company, other than inventory in the ordinary course of business, or (d)
enter into any agreement with any person providing for the acquisition of
Digital, whether by merger, purchase of assets, tender offer or otherwise. In
the event that Digital, or any of the Digital's affiliates shall receive, prior
to the Effective Time or the termination of this Agreement, any offer, proposal,
or request, directly or indirectly, of the type referenced in clause (a) or (c)
above, or any request for disclosure or access pursuant to clause (b) above,
Digital shall promptly notify Agile, but not later than 24 hours thereof,
including information as to the identity of the offeror or the party making any
such offer or proposal and the specific terms of such offer or proposal, as the
case may be, and such other information related thereto as Agile may reasonably
request. The parties hereto agree that irreparable damage would occur in the
event that the provisions of this Section 4.2 were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
by the parties hereto that Agile shall be entitled to seek an injunction or
injunctions to prevent breaches of the provisions of this Section 4.2 and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which Agile may be entitled at law or in equity.
5. Additional Agreements.
---------------------
5.1 Preparation of Permit Application/Information Statement.
-------------------------------------------------------
(a) As soon as practicable after the execution of this Agreement,
Digital shall prepare, with the cooperation of Agile, an Information Statement
for the Shareholders to approve this Agreement, the Certificate of Merger and
the transactions contemplated hereby and thereby. The Information Statement
shall constitute a disclosure document for the offer and issuance of the shares
of Agile Common Stock to be received by the holders of Digital Common Stock in
the Merger. Agile and Digital shall each use reasonable commercial efforts to
cause the Information Statement to comply with applicable federal and state
securities laws requirements. Each of Agile and Digital agrees to provide
promptly to the other such information concerning its business and financial
statements and affairs as, in the reasonable judgment of the providing party or
its counsel, may be required or appropriate for inclusion in the Information
Statement, or in any amendments or supplements thereto, and to cause its counsel
and auditors to cooperate with the other's counsel and auditors in the
preparation of the Information Statement. Digital will promptly advise Agile,
and Agile will promptly advise Digital, in writing if at any time prior to the
Effective Time either Digital or Agile shall obtain knowledge of any facts that
might make it necessary or appropriate to amend or supplement the Information
Statement in order to make the statements contained or incorporated by reference
therein not misleading or to comply with applicable law. The Information
Statement shall contain the recommendation of the Board of Directors of Digital
that the Digital shareholders approve the Merger and this Agreement and the
conclusion of the Board of Directors that the terms and conditions of the Merger
are fair and reasonable to the Shareholders. Anything to the contrary contained
herein notwithstanding, Digital shall not include in the Information Statement
any information with respect to Agile or its affiliates or
33
associates, the form and content of which information shall not have been
approved by Agile prior to such inclusion.
(b) As soon as practicable after the execution of this Agreement,
Agile shall prepare, with the cooperation of Digital, the Permit Application.
Agile and Digital shall each use reasonable commercial efforts to cause the
Permit Application to comply with the requirements of applicable federal and
state laws. Each of Agile and Digital agrees to provide promptly to the other
such information concerning its business and financial statements and affairs
as, in the reasonable judgment of the providing party or its counsel, may be
required or appropriate for inclusion in the Permit Application, or in any
amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and auditors in the preparation of the Permit
Application. Digital will promptly advise Agile, and Agile will promptly advise
Digital, in writing if at any time prior to the Effective Time either Digital or
Agile shall obtain knowledge of any facts that might make it necessary or
appropriate to amend or supplement the Permit Application in order to make the
statements contained or incorporated by reference therein not misleading or to
comply with applicable law. Anything to the contrary contained herein
notwithstanding, Agile shall not include in the Permit Application any
information with respect to Digital or its affiliates or associates, the form
and content of which information shall not have been approved by Digital prior
to such inclusion.
5.2 Approval of Shareholders. Digital shall promptly after the date
------------------------
hereof use reasonable best efforts to take all action necessary in accordance
with California Law and its Articles of Incorporation and Bylaws to obtain by
written consent, the approval of the Digital shareholders of the Merger as soon
as practicable, provided that Digital shall not be required to take any action
that could reasonably be expected to adversely affect the possibility of
obtaining the Permit pursuant to the Fairness Hearing. Subject to Section 5.1,
Digital shall use its efforts to solicit from Shareholders the vote or consent
in favor of the Merger and shall use reasonable best efforts to secure the vote
or consent of shareholders required to effect the Merger.
5.3 Access to Information.
---------------------
(a) Digital shall afford Agile and its accountants, counsel and
other representatives, reasonable access during normal business hours during the
period prior to the Effective Time to (i) all of Digital's properties, personnel
books, contracts, commitments and records, and (ii) all other information
concerning the business, properties and personnel of Digital as Agile may
reasonably request. Agile shall likewise provide Digital with reasonable access
customarily associated with seller-side due diligence in connection with a
merger where the merger consideration includes shares of the acquiring entity.
(b) Subject to compliance with applicable law, from the date
hereof until the Effective Time, each of Agile and Digital shall confer on a
regular and frequent basis with one or more representatives of the other party
to report operational matters of materiality and the general status of ongoing
operations.
(c) No information or knowledge obtained in any investigation
pursuant to this Section 5.4 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
34
5.4 Confidentiality. The terms of that certain Confidentiality
---------------
Agreement, previously executed by the parties on July 22, 1999 (the
"Confidentiality Agreement") shall remain in effect pursuant to its terms during
the term hereof.
5.5 Public Disclosure. Unless otherwise permitted by this Agreement,
-----------------
Agile and Digital shall consult with each other before issuing any press release
or otherwise making any public statement or making any other public (or non-
confidential) disclosure (whether or not in response to an inquiry) regarding
the terms of this Agreement and the transactions contemplated hereby, and
neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange or with
the NASD upon prior notice to the other party. The foregoing shall not be
construed as prohibiting Digital from indicating in general terms in response to
inquiries from third parties concerning a potential acquisition that it is under
a contractual obligation not to discuss such matters.
5.6 Consents; Cooperation.
---------------------
(a) Each of Agile and Digital shall promptly apply for or
otherwise seek, and use reasonable best efforts to obtain, all consents and
approvals required to be obtained by it from Governmental Authorities for the
consummation of the Merger and all necessary consents, waivers and approvals
pursuant to an agreement listed in Sections 2.3, 2.10, 2.14, 2.22 and 2.24 of
the Digital Disclosure Schedule (except for such agreements which are to be
terminated at or before Closing pursuant to the terms hereof) and Section 3.2 of
the Agile Disclosure Schedule in connection with the Merger for the assignment
thereof or otherwise.
(b) Notwithstanding anything to the contrary in Section 5.6(a),
neither Agile nor any of it subsidiaries shall be required to divest any of
their respective businesses, product lines or assets, or to take or agree to
take any other action or agree to any limitation that could reasonably be
expected to have a Material Adverse Effect on Agile or on Agile combined with
the Surviving Corporation after the Effective Time.
5.7 Shareholder Voting Agreement. [Intentionally Deleted.]
----------------------------
5.8 Exemption from Federal Registration; California Blue Sky. The
--------------------------------------------------------
parties shall use their reasonable best efforts to cause the Agile Common Stock
to be issued in connection with the Merger to be issued in a transaction exempt
from registration under the Securities Act by reason of Section 3(a)(10)
thereof, and to cause the Agile Common Stock and the assumption of the Assumed
Options hereunder to be qualified under the California Securities Act, pursuant
to Section 25121 thereof, after the Fairness Hearing has been held pursuant to
the authority granted by Section 25142 of such California Securities Act;
provided however, that if notwithstanding such exercise of reasonable best
efforts, the parties fail to obtain such qualification by permit of such Agile
Common Stock, the parties agree that Agile, with full cooperation of Digital,
shall promptly prepare and file with the Securities and Exchange Commission an
appropriate registration form (the "Registration Statement") in connection with
the offer and issuance of the Agile Common Stock pursuant to the Merger.
35
5.9 Securityholder Agreement; Lock-Up. Digital shall use its
---------------------------------
reasonable best efforts to cause each securityholder of Digital receiving Agile
Common Stock as Merger Consideration, and/or Agile Common Stock upon conversion
of Warrants and/or having Digital Options converted into Assumed Options
pursuant to the Merger (the "Securityholders"), prior to the Closing Date, to
execute and deliver a Securityholder Agreement in the form attached as Exhibit D
---------
hereto. Pursuant to (A) Section 1 of the Securityholder Agreement, such
Securityholders will execute and deliver concurrently with the Securityholder
Agreement a "lock-up" agreement with Agile and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
Incorporated, among others, ("the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Group") in the form attached as
Exhibit A thereto (the "Lock-Up Agreement"), pursuant to which, among other
---------
matters, such Securityholder shall agree with the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Group not to
offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase
or make any short sale of, or otherwise dispose of any shares of Agile Common
Stock or any rights to acquire Agile Common Stock for such period of time from
and after the Effective Time in connection with Agile's current effective
registration statement (Registration No. 333-81387) pursuant to its initial
public offering (the "Current Effective Registration") and (B) Section 2 of such
Securityholder Agreement, such Securityholders shall agree with Agile to such
restrictions regarding dispositions in the event of, and contingent on, other
underwritten public offerings filed under the Securities Act subsequent to the
Effective Time (the "Prospective Effective Registrations," and collectively with
the Current Effective Registration, the "Effective Registrations"), all as
established under such Securityholder Agreement, provided that the terms of such
restrictions are no more restrictive than those required of all Agile
securityholders holding a comparable number of shares of Agile Common Stock
outstanding or under an option or other security to purchase shares of Agile
Common Stock.
5.10 Legal Requirements. Each of Agile, Merger Sub and Digital will,
------------------
and will cause their respective subsidiaries to, take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
them with respect to the consummation of the transactions contemplated by this
Agreement and will promptly cooperate with and furnish information to any party
hereto necessary in connection with any such requirements imposed upon such
other party in connection with the consummation of the transactions contemplated
by this Agreement and will take all reasonable actions necessary to obtain (and
will cooperate with the other parties hereto in obtaining) any consent,
approval, order or authorization of or any registration, declaration or filing
with, any Governmental Entity or other person, required to be obtained or made
in connection with the taking of any action contemplated by this Agreement.
5.11 Employee Options. At the Effective Time, certain employees of
----------------
Digital, as mutually selected by the parties hereto shall be granted new options
to purchase shares of Agile Common Stock under and pursuant to the Agile Stock
Option Plan and having a fair market value on the date of grant thereof, based
on the closing price per share of Agile Common Stock as quoted on the NASDAQ
National Market System as of the Closing Date, an aggregate amount of $5,000,000
after netting the exercise price under such options in the amounts set forth
opposite the name of each such employee. Such options so granted shall be
governed under the terms and conditions of the Agile Stock Option Plan, provided
that the options will vest as to 25% of the underlying shares no later than, on
a weighted average basis, the six-month anniversary from the Closing Date (the
"Initial Vesting Date") and the remaining 75% of the underlying shares will vest
in equal installments on a monthly basis over no greater than an additional 18-
month period after the Initial Vesting Date.
36
5.12 Escrow Agreement. On or before the Effective Time, Agile,
----------------
Escrow Agent (defined below) and the Shareholders' Agent (as defined in Section
8 hereto) will execute the Escrow Agreement contemplated by Section 8 in the
form attached hereto as Exhibit E ("Escrow Agreement").
---------
5.13 Option Exercise. [Intentionally deleted.]
---------------
5.14 Assumed Options; SEC Filing. Agile shall take all corporate
---------------------------
action necessary to reserve for issuance a sufficient number of shares of Agile
Common Stock for delivery under the Assumed Options. Within thirty (30) days
after the Effective Time, Agile shall file a registration statement on Form S-8
(or any successor or other appropriate forms), or another appropriate form, with
respect to the shares of Agile Common Stock subject to the Assumed Options and
shall use its best efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of the
prospectus or prospectuses in connection therewith) for so long as the Assumed
Options remain outstanding.
5.15 Reorganization. Agile and Digital shall each use its reasonable
--------------
best efforts to cause the business combination to be effected by the Merger to
qualify as a "reorganization" described in Section 368 of the Code and to obtain
the opinion of its respective counsel contemplated by Sections 6.2(g) and
6.3(c). Each party shall make such representations as counsel to the parties
shall reasonably request to enable them to render such opinions.
5.16 Digital Warrants Exercise. [Intentionally deleted.]
-------------------------
5.17 Directors' and Officers' Indemnification. For 6 years after the
----------------------------------------
Effective Time, Agile and the Surviving Corporation (or any successor to the
Surviving Corporation) shall indemnify, defend and hold harmless each present
and former officer and director of Digital, and each person who become any of
the foregoing prior to the Effective Time (each, a "Digital Indemnified Party")
against all losses, claims, damages, liabilities, costs, fees and expenses,
including reasonable fees and disbursements of counsel and judgments, fines,
losses, claims, liabilities and amounts paid in settlement (provided that any
such settlement is effected with the written consent of Agile or the Surviving
Corporation such consent not to be unreasonably withheld) arising out of actions
or omissions occurring at or prior to the Effective Time to the full extent
required under applicable California law, the terms of the Articles or Bylaws of
Digital, provided, however, that nothing herein shall limit Agile's rights set
forth in Section 8 hereof.
5.18 Employees. Digital shall use its reasonable best efforts to
---------
cause:
(a) each of ▇▇▇▇▇ ▇▇▇▇▇▇▇, and the employees of Digital as
mutually determined by the parties hereto (the "Designated Employees"), to enter
into employment with Agile;
(b) each Designated Employee, except for ▇▇▇▇▇ ▇▇▇▇▇▇▇, to
execute a Non-Solicitation Agreement in the form attached hereto as Exhibit F
---------
(the "Non-Solicitation Agreement");
37
(c) ▇▇▇▇▇ ▇▇▇▇▇▇▇ to execute a Non-Competition and Non-
Solicitation Agreement in the form attached hereto as Exhibit G (the "Non-
---------
Competition and Non-Solicitation Agreement"); and
(d) each Designated Employee to execute and deliver an
Assignment of Inventions and Non-Disclosure Agreement in the form provided by
Agile (the "Inventions Agreement").
5.19 Employee Registration Rights. The parties agree that, in the
----------------------------
event employees of Agile ("Agile Employees") are permitted to register for sale,
in the aggregate, a total amount of shares of Agile Common Stock ("Agile
Employee Holdings") exceeding 28% (the "Threshold Percentage") of their
aggregate holdings of Agile Common Stock pursuant to a Prospective Effective
Registration prior to the expiration of the "lock-up" period under the Lock-Up
Agreement, then the employees of Digital shall be entitled to register for sale
in such Prospective Effective Registration the percentage of their aggregate
total holdings of Agile Common Stock equal to the differential between the
actual percentage of shares of Agile Employee Holdings permitted to be
registered for sale and the Threshold Percentage.
5.20 Preferred Registration Rights and Obligations Agreement; Letter
---------------------------------------------------------------
of Transmittal and Custodian Agreement. Digital shall use its reasonable best
--------------------------------------
efforts to cause all holders of Digital Preferred Stock and Warrants to acquire
Digital Preferred Stock to enter into the Preferred Registration Rights and
Obligations Agreement and the Letter of Transmittal and Custodian Agreement
thereto.
5.21 Expenses; Transaction Fees. Whether or not the Merger is
--------------------------
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expense. The parties agree that all legal, accounting and investment
banking fees incurred by Digital in connection with the Merger shall be deemed
to be expenses of Digital and shall not become obligations of the Shareholders.
5.22 Termination of 401(k) Plan. Digital agrees to take appropriate
--------------------------
corporate action through its Board of Directors to terminate any and all Digital
Employee Plans that Digital maintains or sponsors which are subject to the
requirements of Section 401(k) of the Code (the "401(k) Plan") prior to the
Closing Date and agrees that no further contributions shall be made to the
401(k) Plan on or after the Closing Date. Prior to the Closing Date, Digital
shall provide to Agile (i) documentation evidencing (to the reasonable
satisfaction of Agile) that any restatement or amendment to the 401(k) Plan was
duly authorized and timely adopted by Digital; (ii) executed resolutions by
Digital's Board of Directors authorizing the termination of the 401(k) Plan and
(iii) an executed amendment to the 401(k) Plan to add all applicable
requirements of the Code and regulations thereunder so that the tax-qualified
status of the 401(k) Plan shall be maintained at the time of termination.
6. Conditions to the Merger.
------------------------
6.1 Conditions to Obligations of Each Party to Effect the Merger.
------------------------------------------------------------
The respective obligations of each party to this Agreement to consummate and
effect this Agreement and the transactions contemplated hereby shall be subject
to the satisfaction at or prior to the
38
Effective Time of each of the following conditions, any of which may be waived,
in writing, by agreement of all the parties hereto:
(a) Shareholder Approval. This Agreement and the Merger shall be
--------------------
approved and adopted by the Shareholders by the requisite vote under applicable
law and the Digital's Articles of Incorporation.
(b) Fairness Hearing; Registration Statement. The Fairness Hearing
----------------------------------------
shall have been held by the Department of Corporations of the State of
California and a permit for the issuance of Agile securities shall have been
issued by the State of California or, pursuant to Section 5.8 hereof, the
Registration Statement shall have been declared effective by the SEC.
(c) No Injunctions or Restraints; Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be and remain in
effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending, which would have a Material
Adverse Effect on either Agile or on Agile combined with the Surviving
Corporation after the Effective Time, nor shall there be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger illegal.
(d) Governmental Approval. Agile, Digital and Merger Sub and their
---------------------
respective subsidiaries, if any, shall have timely obtained from each
Governmental Entity (as defined below) all approvals, waivers and consents, if
any, necessary for consummation of or in connection with the Merger and the
several transactions contemplated hereby, including such approvals, waivers and
consents as may be required under the Securities Act, and under state blue sky
laws, other than filings and approvals relating to the Merger on any of its
properties if failure to obtain such approval, waiver or consent would not have
a Material Adverse Effect on Agile after the Effective Time.
6.2 Additional Conditions to the Obligations of Agile and Merger Sub. The
----------------------------------------------------------------
obligations of Agile and Merger Sub to consummate and effect this Agreement and
the transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Agile:
(a) Representations, Warranties and Covenants. The representations
-----------------------------------------
and warranties of Digital set forth in this Agreement shall be true and correct
in each case as of the date of this Agreement and (except to the extent such
representations and warranties speak as of a specific date which shall be true
and correct as of such date) as of the Closing Date as though made on and as of
the Closing Date, except where the failure of such representations and
warranties to be so true and correct (without giving effect to any limitation as
to "materiality" or "Material Adverse Effect" set forth therein) would not
individually or in the aggregate have a Material Adverse Effect. Agile and
Merger Sub shall have received a certificate signed on behalf of Digital by the
chief executive officer and the chief financial officer of Digital to the effect
set forth in this paragraph.
39
(b) Performance of Obligations. Digital shall have performed and
--------------------------
complied in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by it as of the
Closing.
(c) Conversion of Preferred Stock. The Digital Preferred Stock shall
-----------------------------
have been converted into Digital Common Stock.
(d) Tax Opinion. Agile shall have received a written opinion from
-----------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP to the effect that the Merger will be treated
for Federal income tax purposes as a reorganization within the meaning of
Section 368 of the Internal Revenue Code.
(e) Escrow Agreement. Escrow Agent and the Shareholders' Agent (as
----------------
defined in Section 8 hereof) shall have entered into the Escrow Agreement.
(f) Non-Competition and Non-Solicitation Agreement. ▇▇▇▇▇ ▇▇▇▇▇▇▇ and
----------------------------------------------
Agile shall have entered into the Non-Competition and Non-Solicitation
Agreement.
(g) No Material Adverse Change. There shall not have occurred any
--------------------------
material adverse change in the financial condition, properties, assets
(including intangible assets), liabilities, business, operations, results of
operations or prospects of Digital, taken as a whole, but shall not include any
of the following in and of themselves, either alone or in combination: (i) any
effect or change occurring as a result of (A) general economic or financial
conditions or (B) other developments which are not unique to Digital but also
affect other persons who participate or are engaged in the lines of business in
which Digital participates or is engaged and (ii) any change or effect on the
financial condition, properties, assets, liabilities, business, operations,
results of operations, or prospects of Digital, taken as a whole, following the
date of this Agreement attributable to the announcement of this Agreement or the
transactions contemplated hereby.
(h) No Material Changes in Balance Sheet. There shall not have
------------------------------------
occurred any material adverse changes in Digital's Balance Sheet (including, but
not limited to, cash contributions or material decreases in net assets) between
September 17, 1999 and the Closing Date.
(i) Securityholder Agreement; Lock-Up Agreement. All securityholders
-------------------------------------------
of Digital shall have executed and delivered the Securityholder Agreement and a
Lock-Up Agreement in the form exhibited in such Securityholder Agreement.
(j) Dissenters' Rights. Not more than nine percent (9%) of the
------------------
Digital Capital Stock outstanding immediately prior to the Effective Time shall
have voted against the Merger or shall otherwise be eligible as Dissenters'
Shares.
(k) Legal Opinion. Agile shall have received a legal opinion from
-------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation substantially in the
form of Exhibit H hereto.
---------
40
(l) Termination of 401(k) Plan. Digital shall have taken the actions
--------------------------
described in Section 5.22 to terminate the 401(k) Plan.
(m) Preferred Registration Rights and Obligations Agreement. All
-------------------------------------------------------
holders of Digital Preferred Stock shall have executed and delivered the
Preferred Registration Rights and Obligations Agreement.
(n) Letter of Transmittal and Custodian Agreement. All holders of
---------------------------------------------
Digital Preferred Stock shall have executed and delivered a Letter of
Transmittal and Custodian Agreement.
(o) Warrants. Digital shall have taken all actions required under
--------
Section 1.6(f)(iv) hereof.
6.3 Additional Conditions to Obligations of Digital. The obligations of
-----------------------------------------------
Digital to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by Digital:
(a) Representations, Warranties and Covenants. The representations
-----------------------------------------
and warranties of Agile and Merger Sub set forth in this Agreement shall be true
and correct, in each case as of the date of this Agreement and (except to the
extent such representations and warranties speak as of a specific date which
shall be true and correct as of such date) as of the Closing Date as though made
on and as of the Closing Date, except where the failure of such representations
and warranties to be so true and correct (without giving effect to any
limitation as to "materiality" or "Material Adverse Effect" set forth therein)
would not individually or in the aggregate have a Material Adverse Effect with
respect to, Agile and Merger Sub. Digital shall have received a certificate
signed on behalf of Agile by an authorized officer of Agile to the effect set
forth in this paragraph.
(b) Performance of Obligations. Agile and Merger Sub shall have
--------------------------
performed and complied in all material respects with all covenants, obligations
and conditions of this Agreement required to be performed and complied with by
them as of the Closing and Digital shall have received a certificate executed on
behalf of Agile and Merger Sub by the chief executive officer and the chief
financial officer of Agile and Merger Sub, respectively.
(c) Tax Opinion. Digital shall have received a written opinion from
-----------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, to the effect that
the Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368 of the Internal Revenue Code.
(d) Nasdaq Listing. The shares of Agile Common Stock to be issued to
--------------
the Shareholders pursuant to this Agreement shall have been authorized for
listing on the Nasdaq Stock Market upon official notice of issuance.
(e) Delivery of Cash Consideration. The cash consideration issuable
------------------------------
to the Shareholders and Warrantholders pursuant to this Agreement shall have
been delivered to the Exchange Agent.
41
(f) Legal Opinion. Digital shall have received a legal opinion from
-------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP substantially in the form of Exhibit I hereto.
---------
7. Termination, Amendment and Waiver.
---------------------------------
7.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Effective Time (with respect to Section 7.1(b) through Section 7.1(d), by
written notice by the terminating party to the other party):
(a) by the mutual written consent of Agile and Digital;
(b) by either Agile or Digital if the Merger shall not have been
consummated by January 31, 2000, provided, however, that the right to terminate
--------
this Agreement under this Section 7.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of or resulted in the failure of the Merger to occur on or before such date;
(c) by either Agile or Digital if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, except, if the party relying on such order, decree or ruling or other
action has not complied with its obligations under this Agreement; or
(d) by Agile or Digital, if there has been a breach of any
representation, warranty, covenant or agreement on the part of the other party
set forth in this Agreement, which breach (i) causes the conditions set forth in
Section 6.1 or 6.2 (in the case of termination by Agile) or Section 6.1 or 6.3
(in the case of termination by Digital) not to be satisfied and (ii) shall not
have been cured within fifteen (15) business days following receipt by the
breaching party of written notice of such breach from the other party, provided
that such notifying party shall not be able to terminate the Agreement if it is
likewise in breach of any such representation, warranty, covenant or agreement.
7.2 Effect of Termination. In the event of termination of this
---------------------
Agreement as provided in Section 7.1, there shall be no liability or obligation
on the part of Agile, Digital, Merger Sub or their respective officers,
directors, or stockholders, except to the extent that such termination results
from the breach by a party of any of its representations, warranties or
covenants set forth in this Agreement; provided that the provisions of Sections
5.4, 5.21, 7.1, 9.4 and 9.8 shall remain in full force and effect and survive
any termination of this Agreement.
7.3 Amendment. This Agreement may be amended by the parties hereto,
---------
by action taken or authorized by their respective Boards of Directors. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Effective Time, the
-----------------
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with
42
any of the agreements or conditions contained herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in a written instrument signed on behalf of such party.
8. Escrow and Indemnification.
--------------------------
8.1 Escrow Fund.
-----------
(a) Pursuant to Section 1.7(j) hereof, and as soon as practicable
after the Effective Time, the Indemnification Shares shall be registered in the
name of, and be deposited with, State Street Bank and Trust Company (or such
other institution selected by Agile with the reasonable consent of Digital) as
escrow agent (the "Escrow Agent"), the treatment of which shall be governed by
the terms set forth herein, and in the Escrow Agreement. The foregoing deposit
consisting of the Escrowed Consideration, shall constitute the escrow fund (the
"Escrow Fund") and will be governed by the terms set forth herein and in the
Escrow Agreement. Agile may not receive any proceeds from the Escrow Fund unless
and until one or more Officer's Certificates (as defined in Section 8.3 below)
identifying Damages (as defined in Section 8.2(b) below) in excess of $250,000
(the "Basket Amount") has or have been delivered to the Escrow Agent as provided
in paragraph 8.4 below, in which case Agile shall be entitled to recover for all
Damages (as defined in Section 8.2(b) below) so identified, which when
aggregated with all other Damages, exceed $125,000, provided however, that Agile
shall be entitled to recover for all Damages arising from, or connected to, the
Digital Litigation Matters (defined in Section 8.2(b)), including, without
limitation, the Basket Amount at such time as the identified Damages arising
from, or connected to, the Digital Litigation Matters (when aggregated with all
other Damages) exceed the Basket Amount. In the event Agile issues any
Additional Escrow Shares (as defined below), such shares will be issued in the
name of the Escrow Agent and delivered to the Escrow Agent in the same manner as
the shares of Agile Common Stock delivered pursuant to this Section 8.1(a) (the
"Escrow Shares").
(b) Except for dividends paid in stock declared with respect to
the Escrow Shares ("Additional Escrow Shares"), which shall be treated as set
forth in Section 8.1(a) hereof, any cash dividends, dividends payable in
securities or other distributions of any kind made in respect of the Escrow
Shares will be delivered to the former Shareholders and Warrantholders on a pro
rata basis based on the number of Escrow Shares contributed to the Escrow Fund.
Each former Shareholder or Warrantholder will have voting rights with respect to
the Escrow Shares deposited in the Escrow Fund with respect to such former
Shareholder or Warrantholder so long as such Escrow Shares are held in escrow
("Escrow") and Agile will take all reasonable steps necessary to allow the
exercise of such rights. While the Escrow Shares remain in the Escrow Agent's
possession pursuant to this Agreement, the former Shareholders and
Warrantholders will retain and will be able to exercise all other incidents of
ownership of said Escrow Shares which are not inconsistent with the terms and
conditions of this Agreement.
8.2 Indemnification.
---------------
(a) Survival of Representations, Warranties and Covenants.
-----------------------------------------------------
Notwithstanding any investigation conducted before or after the Closing Date,
and notwithstanding any actual or implied knowledge or notice of any facts or
circumstances which
43
Agile may have as a result of such investigation or otherwise, Agile will be
entitled to rely upon Digital's representations, warranties and covenants set
forth in this Agreement (as modified by the Digital Disclosure Schedule) or in
any certificate, schedule or exhibit delivered pursuant hereto. The obligations
of Digital with respect to such representations, warranties, agreements and
covenants will survive the Closing and continue in full force and effect until
the date twelve (12) months following the Closing Date (the "Termination Date"),
at which time the representations, warranties and covenants of Digital set forth
in this Agreement or in any certificate, schedule or exhibit delivered pursuant
hereto will terminate; provided, however, that thereafter Digital will remain
liable to the extent set forth below for Damages provided that a notice of such
Damages has been delivered to such party on or before the Termination Date and
until such time as such indemnity claim has been fully quantified and/or
decided, settled or adjudicated.
(b) Indemnification by Digital. Subject to the limitations set forth
--------------------------
in this Section 8, the Shareholders and Warrantholders immediately prior to the
Effective Time (collectively, the "Shareholder Indemnitors") will jointly and
severally indemnify and hold harmless Agile and the Surviving Corporation and
its respective officers, directors, agents, attorneys and employees, and each
person, if any, who controls or may control Agile or the Surviving Corporation
within the meaning of the Securities Act (hereinafter referred to individually
as an "Agile Indemnified Person" and collectively as "Agile Indemnified
Persons") from and against any and all any and all debts, obligations and other
liabilities, losses, damages (including any diminution in value of Digital or
its assets and all actual, punitive and consequential damages), claims, fines,
fees, penalties, interest obligations, deficiencies, and expenses (including,
without limitation, amounts paid in settlement, interest, court costs,
reasonable out-of-pocket fees and expenses of investigators, attorneys,
accountants, financial advisors and other experts, and other reasonable out-of-
pocket expenses of litigation, whether or not such litigation is resolved
against Agile) ("Damages") directly or indirectly arising from, or connected to,
(i) any misrepresentation or breach of or default in connection with any of the
representations, warranties, covenants and agreements given or made by Digital
in this Agreement, the Digital Disclosure Schedules or any schedule to this
Agreement; (ii) any claim by a third party, which if true, would constitute a
misrepresentation or breach of or default in connection with any of the
representations, warranties, covenants and agreements given or made by Digital
in this Agreement, the Digital Disclosure Schedules or any schedule to this
Agreement; or (iii) the litigation matters described and set forth in Schedule
8.2(b) attached hereto (each a "Digital Litigation Matter," and collectively,
the "Digital Litigation Matters").
(c) Maximum Indemnification. In the event the Shareholder Indemnitors
-----------------------
shall have any liability for indemnification or otherwise (including without
limitation, for breach of covenants or otherwise at law or equity) to any Agile
Indemnified Person under this Agreement, the sole satisfaction of such liability
shall be from the Escrow Fund, provided however, that nothing in this Agreement
shall limit the liability in amount, indemnification period, or otherwise (i) of
Digital with respect to fraud or criminal activity or (ii) of any Shareholder
Indemnitor with respect to fraud or criminal activity or in connection with any
breach by such Shareholder Indemnitor of any representation or covenant of such
Shareholder Indemnitor in any of the agreements which are Exhibits hereto or any
agreement, certificate or document delivered by such Shareholder Indemnitor
(excluding those entered into as an authorized and qualified representative on
behalf of Digital) in connection with the Merger
44
and the transactions contemplated thereby to which such Shareholder Indemnitor
is a party or otherwise bound.
8.3 Escrow Period; Release From Escrow.
----------------------------------
(a) The Escrow Period shall terminate upon the expiration of twelve
(12) months after the Effective Time, provided, however, that a portion of the
Escrow Fund, which, in the reasonable judgment of Agile, subject to the
objection of the Shareholders' Agent (defined below) and the subsequent
arbitration of the matter in the manner provided in Section 8.6 hereof, is
necessary or reasonably potentially necessary to satisfy any unsatisfied or
unquantified claims specified in any Officer's Certificate theretofore delivered
to the Escrow Agent prior to termination of the Escrow Period shall remain in
the Escrow Fund until such claims have been quantified or resolved.
(b) Within three (3) business days after the Termination Date (the
"Release Date"), the Escrow Agent shall release from escrow to the Shareholder
Indemnitors their pro rata portion of the Escrow Shares in the Escrow Fund, less
with respect to each such Shareholder Indemnitor the number of Escrow Shares in
the Escrow Fund with a value (as determined pursuant to Section 8.4) equal to
(A) such Shareholder Indemnitor's pro rata portion of any Escrow Shares
delivered to Agile in accordance with Section 8.4 in satisfaction of
indemnification claims by an Agile Indemnified Person and (B) such Shareholder
Indemnitor's pro rata portion of any liability subject to delivery to an Agile
Indemnified Person in accordance with Section 8.3(a) with respect to any pending
but unquantified or unresolved indemnification claims of an Agile Indemnified
Person. Any Escrow Shares in the Escrow held as a result of clause (B) shall be
released to the Shareholder Indemnitors or released to Agile (as appropriate)
promptly upon quantification or resolution of each specific indemnification
claim involved. Escrow Shares in the Escrow shall be released to the respective
Shareholder Indemnitors, in proportion to their respective percentage interest
in the Escrow Fund as specified in Appendix B to the Escrow Agreement. Agile
will take such action as may be necessary to cause such certificates to be
issued in the names of the appropriate persons. Certificates representing
Escrowed Consideration and Additional Escrow Shares in the Escrow so issued that
are subject to resale restrictions under applicable securities laws will bear a
legend to that effect. No fractional shares shall be released and delivered
from Escrow to the Shareholder Indemnitors. In lieu of any fraction of an
Escrow Share to which a Shareholder Indemnitor would otherwise be entitled, such
holder will receive from Agile an amount of cash (rounded to the nearest whole
cent) equal to the product of such fraction multiplied by the Escrow Release
Price (as defined in Section 8.4).
(c) No Escrow Shares in the Escrow Fund or any beneficial interest
therein may be pledged, sold, assigned or transferred, including by operation of
law, by any Shareholder Indemnitor or be taken or reached by any legal or
equitable process in satisfaction of any debt or other liability of any such
Shareholder Indemnitor prior to the delivery to such Shareholder Indemnitor of
his pro rata portion of the Escrow Fund by the Escrow Agent as provided herein.
45
(d) The Escrow Agent is hereby granted the power to effect any
transfer of Escrow Shares contemplated by this Agreement. Agile will cooperate
with the Escrow Agent in promptly issuing stock certificates to effect such
transfers.
8.4 Claims Upon Escrow Fund. Upon receipt by the Escrow Agent on or
-----------------------
before the Release Date of a certificate signed by the Chief Executive Officer,
President or Chief Financial Officer of Agile (an "Officer's Certificate")
stating that with respect to the indemnification obligations of the Shareholder
Indemnitors in Section 8.2, Damages exist and specifying in reasonable detail
the individual items of such Damages included in the amount so stated, the date
each such item was paid, or properly accrued or arose, and the nature of the
misrepresentation, breach of warranty, default of a covenant or other agreement
or claim to which such item is related, or the manner in which it is related to
a Digital Litigation Matter, the Escrow Agent shall, subject to the provisions
of this Section 8, deliver to Agile out of the Escrow Fund, as promptly as
practicable after the claim is determined to be undisputed or any dispute
concerning the claim is resolved as set forth in this Section 8, Agile Common
Stock, cash or other assets held in the Escrow Fund having a value equal to such
Damages, provided, however, that if the claim is based on a third-party claim,
including a Digital Litigation Matter, that has not been fully adjudicated or
settled or is not otherwise reasonably quantifiable by objective means, then the
Officer's Certificate shall so state and briefly describe the circumstances that
affect the quantifiability of the claimed amount. At such time, if any, as
Agile enters into a settlement pursuant to Section 8.9(b) with respect to a
claim made in an Officer's Certificate that was unquantified and the
Shareholders' Agent has not consented in writing to such settlement, Agile will
file a supplementary Officer's Certificate (which may be filed after the Release
Date) with respect to such claim. For the purpose of compensating Agile for its
Damages pursuant to this Agreement, the Escrow Shares shall be valued at the
Escrow Release Price (defined below). For purposes of this Agreement, the term
"Escrow Release Price" shall mean the average of the closing price per share of
Agile's Common Stock as quoted on the NASDAQ National Market System, as reported
on the West Coast Edition of the Wall Street Journal, for the 10 consecutive
trading days ending five (5) trading days (such average to include the closing
price per share of Agile Common Stock on the first day of the five trading days)
prior to the date on which the Escrow Agent releases the Escrow Shares to Agile
in accordance with this Section 8 and the Escrow Agreement.
8.5 Objections to Claims. At the time of delivery of any Officer's
--------------------
Certificate to the Escrow Agent, a duplicate copy of such Officer's Certificate
shall be delivered to the Shareholders' Agent and for a period of thirty (30)
days after such delivery, the Escrow Agent shall make no delivery of Escrow
Shares pursuant to Section 8.4 hereof unless the Escrow Agent shall have
received written authorization from the Shareholders' Agent to make such
delivery. After the expiration of such thirty (30) day period, the Escrow Agent
shall make delivery of the Escrow Shares in the Escrow Fund in accordance with
Section 8.4 hereof, provided that no such payment or delivery may be made if the
Shareholders' Agent shall object in a written statement to the claim made in the
Officer's Certificate, including a claim in connection with any settlements made
by Agile pursuant to Section 8.9(b) hereof without having received the
Shareholder Agent's consent, and such statement shall have been delivered to the
Escrow Agent and to Agile prior to the expiration of such thirty (30) day
period. With respect to any Officer's Certificate filed with respect to a claim
that has not been fully adjudicated or settled or is otherwise not quantifiable
as of the time of the filing of the Officer's Certificate (an
46
"Unquantifiable Claim"), regardless of whether an objection to such claim is
actually delivered pursuant to this Section 8.5, an objection to the amount of
the claim shall be deemed filed pursuant to this Section 8.5.
8.6 Resolution of Conflicts and Arbitration.
---------------------------------------
(a) In case the Shareholders' Agent shall so object in writing to any
claim or claims by Agile made in any Officer's Certificate, including a claim by
Agile in connection with any settlements pursuant to Section 8.9(b) hereof
without having received the Shareholder Agent's consent, Agile shall have thirty
(30) days to respond in a written statement to the objection of the
Shareholders' Agent. If after such thirty (30) day period there remains a
dispute as to any claims, the Shareholders' Agent and Agile shall attempt in
good faith for sixty (60) days to agree upon the rights of the respective
parties with respect to each of such claims. With respect to Unquantifiable
Claims, the parties shall attempt in good faith to agree upon the rights of the
respective parties with respect to each such claim for ninety (90) days after
the date of any Officer's Certificate with respect to such claim. If the
Shareholders' Agent and Agile should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and shall be furnished to
the Escrow Agent. With respect to an Unquantifiable Claim, such memorandum may
provide that the amount of liability with respect to the Unquantifiable Claim
shall be determined by mutual agreement of the parties after the third party
claim has been reduced to judgment or settled or until the claim has otherwise
become reasonably quantifiable by objective reasons. The Escrow Agent shall be
entitled to rely on any such memorandum and shall distribute the Agile Common
Stock or other property from the Escrow Fund in accordance with the terms
thereof. Agile shall have no obligation to respond to objections to
Unquantifiable Claims deemed made pursuant to Section 8.5.
(b) If no such agreement can be reached after good faith negotiation,
either Agile or the Shareholders' Agent may, by written notice to the other,
demand arbitration of the matter unless the amount of the damage or loss is at
issue in pending litigation with a third party, in which event arbitration shall
not be commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be settled by arbitration
conducted by one arbitrator. Agile and the Shareholders' Agent shall agree on
the arbitrator, provided that if Agile and the Shareholders' Agent cannot agree
on such arbitrator, either Agile or Shareholders' Agent can request that
Judicial Arbitration and Mediation Services ("JAMS") select the arbitrator. The
arbitrator shall set a limited time period and establish procedures designed to
reduce the cost and time for discovery while allowing the parties an
opportunity, adequate in the sole judgment of the arbitrator, to discover
relevant information from the opposing parties about the subject matter of the
dispute. The arbitrator shall rule upon motions to compel or limit discovery
and shall have the authority to impose sanctions, including attorneys' fees and
costs, to the same extent as a court of competent law or equity, should the
arbitrator determine that discovery was sought without substantial
justification, that discovery was refused or objected to without substantial
justification, or that a party has engaged in any other practice that would
justify the imposition of sanctions if the dispute were being litigated in
Superior Court in the county in which the arbitration is being held. The
decision of the arbitrator shall be written, shall be in accordance with
applicable law and with this Agreement, and shall be supported by written
findings of fact and conclusion of law which shall set forth the basis for the
decision of the arbitrator. The decision of the arbitrator as to the validity
and amount of any claim
47
in such Officer's Certificate shall be binding and conclusive upon the parties
to this Agreement, and notwithstanding anything in Section 8.5 hereof, the
Escrow Agent shall be entitled to act in accordance with such decision and make
or withhold payments out of the Escrow Fund in accordance therewith.
Notwithstanding any other provision of this Section 8.6, if the claim is an
Unquantifiable Claim at the time when the arbitration proceeding is scheduled to
commence, then either party shall have the right to delay the arbitration
proceeding as to the amount of the liability, but not as to whether Shareholder
Indemnitors are liable for such claim, until such third-party claim, including a
claim for any Digital Litigation Matter, has been reduced to judgment or settled
or until the claim has otherwise become reasonably quantifiable by objective
means. Any dispute as to the quantifiability of the claim shall be settled by
binding arbitration in accordance with the procedures set forth herein.
(c) Judgment upon any award rendered by the arbitrator may be entered
in any court having jurisdiction. Any such arbitration shall be held in Santa
▇▇▇▇▇ County, California under the commercial rules then in effect of the
American Arbitration Association. For purposes of this Section 8.6(c), in any
arbitration hereunder in which any claim or the amount thereof stated in the
Officer's Certificate is at issue, Agile shall be deemed to be the Non-
Prevailing Party unless the arbitrators award Agile more than one-half (1/2) of
the amount in dispute, plus any amounts not in dispute; otherwise, the
Shareholder Indemnitors for whom the Escrow Shares have been deposited in the
Escrow Fund shall be deemed to be the Non-Prevailing Party. The Non-Prevailing
Party to an arbitration shall pay its own expenses, the fees of the arbitrator,
any administrative fee of JAMS, and the expenses, including attorneys' fees and
costs, reasonably incurred by the other party to the arbitration.
8.7 Shareholders' Agent.
-------------------
(a) ▇▇▇ ▇▇▇▇ shall be constituted and appointed as agent
("Shareholders' Agent") for and on behalf of the Shareholder Indemnitors to give
and receive notices and communications, to authorize delivery to Agile of the
Escrow Shares from the Escrow Fund in satisfaction of claims by Agile, to object
to such deliveries, to agree to, negotiate, enter into settlements and
compromises of, and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to such claims, and to take all actions
necessary or appropriate in the judgment of the Shareholders' Agent for the
accomplishment of the foregoing. Such agency may be changed by the holders of a
majority in interest of the Escrow Fund from time to time upon not less than ten
(10) days' prior written notice to Agile. No bond shall be required of the
Shareholders' Agent, and the Shareholders' Agent shall receive no compensation
for his services, provided, however that the Shareholder Agent shall be entitled
to reimbursement of all reasonable out-of-pocket expenses incurred in serving in
this capacity from the Escrow Fund. Notices or communications to or from the
Shareholders' Agent shall constitute notice to or from each of the Shareholder
Indemnitors.
(b) The Shareholders' Agent shall not be liable for any act done or
omitted hereunder as Shareholder' Agent while acting in good faith and in the
exercise of reasonable judgment and any act done or omitted pursuant to the
advice of counsel shall be conclusive evidence of such good faith. The
Shareholder Indemnitors shall severally indemnify the Shareholders' Agent and
hold him harmless against any loss, liability or expense incurred
48
without gross negligence or bad faith on the part of the Shareholders' Agent and
arising out of or in connection with the acceptance or administration of his
duties hereunder.
(c) The Shareholders' Agent shall have reasonable access to
information about the Surviving Corporation, and Agile will not preclude the
Shareholders' Agent from relevant discussions with former officers and other
employees of Digital, provided that the Shareholders' Agent shall treat
confidentially and not disclose any nonpublic information from or about
Surviving Corporation to anyone (except on a need to know basis to individuals
who agree to treat such information confidentially).
8.8 Actions of the Shareholders' Agent. A decision, act, consent or
----------------------------------
instruction of the Shareholders' Agent shall constitute a decision of all
Shareholder Indemnitors for whom Escrow Shares are deposited in the Escrow Fund
and shall be final, binding and conclusive upon each such Shareholder
Indemnitor, and the Escrow Agent and Agile may rely upon any decision, act,
consent or instruction of the Shareholders' Agent as being the decision, act,
consent or instruction of each and every such Shareholder Indemnitor. The
Escrow Agent and Agile are hereby relieved from any liability to any person for
any acts done by them in accordance with such decision, act, consent or
instruction of the Shareholders' Agent.
8.9 Third-Party Claims; Settlements.
-------------------------------
(a) In the event Agile becomes aware of a third-party claim which
Agile believes may result in a demand against the Escrow Fund, Agile shall
notify the Shareholders' Agent of such claim, and the Shareholders' Agent and
the Shareholder Indemnitors for whom shares of Agile Common Stock and cash
otherwise issuable to them are deposited in the Escrow Fund shall be entitled,
at their expense, to participate in any defense of such claim. Agile shall have
the right in its sole discretion to settle any such claim. In the event that
the Shareholders' Agent has consented to any such settlement, the Shareholders'
Agent shall have no power or authority to object under Section 8.5 or any other
provision of this Section 8 to the amount of any claim by Agile against the
Escrow Fund for indemnity with respect to such settlement.
(b) Notwithstanding the foregoing, with respect to settlements
regarding any Digital Litigation Matter, including for those matters pending as
of the date hereof, Agile shall not agree to any settlement of such claims
without the prior written consent of the Shareholders' Agent, which shall not be
unreasonably withheld. Any disputes arising out of an objection by the
Shareholder Agent for such settlement by Agile shall be resolved pursuant to the
procedures set forth in Section 8.6 hereto. Despite any objection to the
settlement by Shareholder Agent, Agile shall be entitled to settle any Digital
Litigation Matters and to recover indemnification therefrom, subject to the
right of the Shareholders' Agent to dispute the claim pursuant to Section 8.5.
9. General Provisions.
------------------
9.1 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed duly delivered if delivered personally (upon
receipt), or three (3) business days after being mailed by registered or
certified mail, postage prepaid (return receipt
49
requested), or one (1) business day after it is sent by commercial overnight
courier service, or upon transmission, if sent via facsimile (with confirmation
of receipt) to the parties at the following address (or at such other address
for a party as shall be specified by like notice):
(a) if to Agile or Merger Sub, to:
Agile Software Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Digital, to:
Digital Market, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
50
(c) if to Shareholders' Agent, to:
▇▇▇ ▇▇▇▇
c/o Wongfratris Company
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
9.2 Definitions. In this Agreement any reference to any event,
-----------
change, condition or effect being "material" with respect to any entity or group
of entities means any material event, change, condition or effect related to the
financial condition, properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such entity or
group of entities. In this Agreement any reference to a "Material Adverse
Effect" with respect to any entity or group of entities means any event, change
or effect that is materially adverse to the financial condition, properties,
assets, liabilities, business, operations, results of operations, or prospects
of Digital or Agile, as the case may be, taken as a whole, but shall not include
any of the following in and of themselves, either alone or in combination: (i)
any effect or change occurring as a result of (A) general economic or financial
conditions or (B) other developments which are not unique to Digital or Agile,
as the case may be, but also affect other persons who participate or are engaged
in the lines of business in which Digital or Agile, as the case may be,
participates or is engaged and (ii) any change or effect on the financial
condition, properties, assets, liabilities, business, operations, results of
operations, or prospects of Digital or Agile, as the case may be, following the
date of this Agreement attributable to the announcement of this Agreement or the
transactions contemplated hereby.
9.3 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.4 Entire Agreement; Nonassignability; Parties in Interest. This
-------------------------------------------------------
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Digital Disclosure Schedule and the Agile Disclosure
Schedule (a) constitute the entire agreement among the
51
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof except for the Confidentiality Agreement,
which shall continue in full force and effect, and shall survive any termination
of this Agreement or the Closing, in accordance with its terms; (b) are not
intended to confer upon any other person any rights or remedies hereunder, and
shall not be assigned by operation of law or otherwise without the written
consent of the other party.
9.5 Severability. In the event that any provision of this Agreement,
------------
or the application thereof becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.6 Remedies Cumulative. Except as otherwise provided herein, any
-------------------
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
9.7 Arbitration.
-----------
(a) Subject to paragraph (b) below and the limitations set forth
in the provisions of Section 8 hereof, the parties shall endeavor to resolve all
disputes by agreement and to that end shall each provide the other with
sufficient descriptions and information regarding its position to permit
informed assessments and decisions. Any disagreement, claim, demand,
controversy, or dispute which arises after the Closing in any way relating to
this Agreement and the performance or alleged breach by the parties, whether
involving questions of law or fact or both and regardless of the nature thereof
or the remedy therefor, which is not settled by agreement of the parties shall
be resolved consistent with the arbitration provisions in Section 8.6 of the
Agreement.
(b) Any party hereto may request a court of competent
jurisdiction to grant provisional injunctive relief to such party until an
arbitrator can render an award on the matter in question and such award can be
confirmed by a court having jurisdiction thereof.
9.8 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of California regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
9.9 Rules of Construction. The parties hereto agree that they have
---------------------
been represented by counsel during the negotiation, preparation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
52
[signature page follows.]
53
IN WITNESS WHEREOF, Digital, Agile and Merger Sub have caused this
Agreement to be executed and delivered by each of them or their respective
officers thereunto duly authorized, all as of the date first written above.
DIGITAL MARKET, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President and
Chief Executive Officer
AGILE SOFTWARE CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Financial
Officer
ALASKA ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Executive
Officer
54